Mosaic Brands facing clean-out

Millers is one of Mosaic Brands’ core brands. Picture: Steven Saphore

A liquidation for at least parts of collapsed retailer Mosaic Brands is presenting as a strong possibility, market sources say, as a major restructure plan unfolds in the background that involves closing more than half its stores.

The understanding in the market is that as part of the plan to keep alive at least some of the business, some distribution centres would also close and the corporate headcount would be slashed at the same time as a large number of stores in its 700-strong network across Australia and New Zealand would shut.

Retail market experts say the brands most likely to survive a restructure would be department store Noni B, which had earlier reduced its foot print in an effort to become profitable, while the discounted menswear chain Rivers had been one of the better performing brands.

Mosaic Brands entered voluntary administration and receivership on October 28 after its future had been hanging in the balance for years.

Its struggles come amid tough economic conditions in which the apparel industry is discounting stock across the board, with sale events such as Black Friday placing even more pressure on groups.

The high cost of living is a focus for Australians, and is a key issue that has also played out in the US election.

KPMG is working as receiver of Mosaic Brands is KPMG, while FTI Consulting is working as voluntary administrator, an appointment first flagged by DataRoom. Mosaic Brands had been in and out of safe harbour protection, which provides scope to trade while insolvent while sorting out affairs.

Mosaic Brands’ lender Hillco is owed between $20m and $40m.

Also hurting Mosaic Brands, which has 2700 employees, has been disruptions relating to suppliers and inventory management. It earlier said it would focus on its core brands, including Katies, Millers, Noni B and Rivers, and before its collapse had announced it would axe its fashion outlets Rockmans, Autograph, Crossroads, W.Lane and BeMe.

The understanding is that few buyers have so far come forward for the group, and the plan to rationalise has gone further.

The latest development comes after its bondholders in September agreed to new payment terms on debt owed, and earlier there was talk that the situation could result in a deed of company arrangement to bail out the business involving key shareholders such as Spotlight and private equity firm Alceon.

Mosaic Brands said in a statement that a significant majority of its commercial partners supported the initial restructure plan, but a small number of parties declined the support, and a commercially acceptable resolution could not be reached with the Australian Competition & Consumer Commission.