Mosaic Brands negotiates with landlords for rent reprieve

Rivers signage at its Collins Street store in Melbourne. Rivers is owned by Mosaic Brands. Picture: AAP

Embattled apparel retailer Mosaic Brands is believed to be applying pressure on landlords to cut rents as part of its battle for survival amid a tough economic environment.

Mosaic Brands, which last traded at 3.6c, has been suspended from ASX trading since the start of August as it remains in safe harbour protection, with Deloitte assisting with a refinancing.

It’s understood that Mosaic, which has brands including Katies, Crossroads, Autograph, Millers, Rivers and Noni B, has been in and out of safe harbour protection in recent years.

Safe harbour law provisions protect directors from trading while insolvent to provide a company time to reorganise its affairs and place it back into profitability.

The understanding is that the lenders to Mosaic Brands have so far been supportive of the group, which owes about $20m to $40m to Hillco.

However, negotiations have been unfolding with landlords, who are believed to be taking a tough stance, including Westfield owner Scentre Group, which has minimal exposure, Vicinity and Stockland, among others.

Analysts say Scentre Group typically takes a particularly tough approach on such matters.

It is understood that Vicinity, which has about 40 stores owned by Mosaic Brands as tenants in its portfolio, accounting for about 0.3 per cent of its entire rental income, has relet about 15 of those stores to other tenants.

Mosaic is among a number of retailers struggling in the soft economic conditions brought about by higher interest rates, unemployment and inflation.

Operating nine retail clothing brands across about 700 stores in Australia and New Zealand and through online platforms, it last updated the market on its performance in July.

It said that it had net cash inflows of about $6.6m for the quarter compared to $19.8m in outflows in the previous quarter.

Hurting the group has been disruption migrating to a fully integrated logistical supply chain and distribution system with a newly appointed global partner, and with it coming later than expected.

It flagged that it would report operating earnings before interest, tax, depreciation and amortisation loss of between $5m and $10m and earnings before interest and tax loss of between $15m and $20m for the year to June.

It also anticipated a loss for the first half of this financial year.

The group has been working on a refinancing or an extension of its outstanding convertible notes.

According to its accounts, its lease liabilities were $39.86m at December 2023.