SYDNEY: Creditors burnt by the collapse of Sydney fashion house Monti Australia have taken the extraordinary decision to help finance a new apparel business set up by its former owners.
Fabric house Montgomery Textiles and several other suppliers are believed to have help fund the new fashion house, dubbed the LYF Group, founded by the former owners of Monti husband-and-wife team Yuval and Leisa French.
It is understood the new group launched less than three weeks after the October collapse of Monti which sank beneath a debt of more than $10 million.
In all 227 creditors are owed more than $10.2 million by Monti, which was responsible for brands including Monica, Carbon and Club Capri. While many of the debtors are from abroad, Australia's St George Bank is the company's single biggest creditor, and its only secured creditor, with $7.1 million outstanding. Other Australian businesses owed money by the group include Future Business Systems (owed $49,600), Condo Fashion Agency ($32,700), Montgomery Textiles ($147,900), Charles Parsons ($17,700) and Stacey Dale Agencies ($40,300). The largest debt owed to an individual creditor ($91,000) is to a woman named Lisa Ho believed to be unassociated with the Australian designer of the same name.
According to report filed with the Australian Securities & Investment Corporation (ASIC), by liquidator Scott Pascoe the company's books showed the total value of Monti's assets stood at $15.4 million including stock, plant and machinery, together with what was termed "other assets". Pascoe's report showed they had an estimated realisable value of just $409,832.
However in an unusual move, it is understood Montgomery is supporting LYF with financial backing as well as allowing the fashion house to operate out of its Alexandria premises. Other creditors have also supported the new business providing plant and equipment.
Despite repeated requests dating back to December, executives at Montgomery Textiles failed to return calls. Likewise despite approaching Ragtrader several weeks ago to request help to promote the launch of the new company, the French's neglected to respond to questions submitted by the magazine by the time of press.
However, in an earlier email Yuval French confirmed he had started the new company on November 3 with the staff roster including nine employees from Monti.
French said LYF would launch its first collection for summer 2009 in March.
The company was doing "a lot of development work" for many large retailers that had previously supported Monti, he said.
French said neither he nor Leisa were big on self-promotion as both were "very private and shy people".
"All our achievements in business [were] always done in a very quiet, humble and modest way, however I would like you help with re-launching our new business to help us to get back on our feet.
"I think that it's important not only to our customers that followed our brand for so long and us, but also it's good for our industry to hear not only about the bad news but also about the great opportunity that we can all have. My dad once told me that success is not if you fall down, but how quick you can get up."
French had earlier claimed he didn't know why his company went broke claiming he had never defaulted on an overdraft interest payment or on his tax. He claimed representatives from St George walked in on July 15 and told the French's they had 15 days to pay off their overdraft.
It is understood Monti tried unsuccessfully to sell its two buildings in Marrickville. Although the family home and other assets were sold, the net proceeds from those failed to cover the debt.
Of the creditors spoken to by Ragtrader, most were of the opinion that the French's were not to blame for the collapse. One creditor spoken to, who asked that his name not be used, said he believed the fault lay squarely at the feet of St George. The source, who has shown faith in the Yuval partnership by continuing to supply the LYF Group, said he believed the bank had "no intention" of selling the business as a going concern and was interested only in getting its money back.
"When I heard they were looking at selling the Monti assets I asked that I be kept informed as I might be interested in buying something. I did not hear from them and was recently informed [by a third party] the auction had closed [several] weeks ago. There were no reserve sales."
A second creditor, Barry Silbert of Barry Silbert Marketing, said he was "terribly disappointed" to see Monti go under. While admitting he was "nervous" when Monti expanded, none of the agencies which sold on behalf of the company had seen the collapse coming, Silbert said.
"Having been involved in the company since it started [17 years ago] there was a group of us [agencies] that worked together - we were like a close knit family and had become typecast in their type of product. Ten points to them if they can do it over again. It's disappointing for us because we don't have the white knight in the corner. Not only are we making a loss on our own behalf but we are unable to safeguard the profits of the retailers."
The first meeting of Monti creditors was held on December 15.
@cap:Charles Parsons: One of several companies owned money by collapsed fashion house Monti.