Spotlight backs Mosaic Brands’ $32m equity raise

Mosaic Brands, which owns a string of clothing chains including Noni B and Katies, is believed to be in search for between $10m and $100m from equity investors. Picture: Steven Saphore/NCA NewsWire

Retailer Spotlight is securing a $10m stake in NoniB owner Mosaic Brands as part of a $32m equity raising to help weather the trading storm brought on by lockdowns.

The group owns retail chains Millers, Katie’s, Crossroads, Autograph, NoniB and Rockmans and signalled an equity raising was on the cards when it reported its full year results on Tuesday afternoon.

Mosaic will raise $32m through convertible notes offering an 8 per cent coupon over a three-year term in a deal handled by Wilsons.

Spotlight will secure the $10m of the convertible notes through a placement, while the remainder would be offered to shareholders in an entitlement offer.

The notes will rank behind ANZ loans to the company but ahead of ordinary equity and would convert after 12 months at a 15 per cent discount to the one-month volume average weighted price.

Mosaic’s market value is currently $44m and it is believed to be tapping the market due to the Covid-19 trading uncertainty.

The company runs 1091 stores and across Australia and New Zealand and sources say Mosaic has been in negotiations with landlords about rental payments at a time that mall owners like Chadstone shopping centre owner Vicinity Centres and Scentre Group, which owns Westfield Centres, are taking a hard line against its tenants in Victoria and NSW where lockdowns are in place.

Scentre last year locked the doors on Mosaic over a rental dispute and some questions whether the tensions will once again escalate, with both landlords and retailers under financial pressure.

Already last week, stationery chain Kikki.K was placed into voluntary administration as it buckled under the pressure of lockdowns.

Mosaic has 45 per cent of its leases expiring in December and 88 per cent in 2023.

The company booked annual underlying earnings of $48.2m, up slightly from $45m last year, with the result net of its acquisition of an additional interest in Ezibuy.

Mosaic has $202m of current liabilities and $148m of current assets, with its net assets at minus $71m.

It had $15m of borrowings during the 2020 financial year, $50m of cash and $25m of net cash.

Mosaic posted a $2.8m net profit for the 12 months to June.

It received $94m in Job Keeper payments.

Alceon Group is expected to take up its share of the convertible notes. It owns a 35.9 per cent stake in Mosaic Brands and has representatives on its board.