Initial inquiries suggest that Mosaic Brands had “likely” entered safe harbour as early as late 2022.
This is according to the administrators at FTI Consulting, in a document tabled to ASIC covering the latest creditors’ meeting on November 27. This document was obtained by Ragtrader.
According to the minutes, the administrators had asked safe harbour advisors about when Mosaic first entered safe harbour, with the advisors claiming it was likely late 2022.
This comes as Mosaic Brands - the owner of several fashion entities including Noni B, Rivers and Millers - entered voluntary administration on October 28, with preliminary figures indicating that total liabilities are around $250 million.
Senior secured lenders are reportedly owed around $36.5 million and $22 million to the noteholders, while $15 million is owed to employees by way of annual leave and long service leave “as well as other outstanding entitlements.”
The administrators noted that a total of 1,429 creditor enquiries have been received as of November 27, adding that they are continuing to receive a large amount of enquiries. Mosaic is now reportedly up for sale, with recent reports confirming that a dozen entities were initially interested.
The news surrounding the safe harbour arrangement timeline comes after recent media articles reported that Mosaic had entered safe harbour earlier this year.
Safe harbour is a provision where company directors can remain in control of a troubled business in order to restructure it and trade out of its difficulties. For Australian companies, it also gives directors protection from personal liability for debts incurred by an insolvent company.
Mosaic Brands had responded to the initial reports raised in early August this year, confirming that its directors “have and continue to take advice from advisors on their ongoing duties.”
“These fiduciary obligations are matters the board has always taken seriously and we confirm that the advice provided has extended, from time to time, to considering the applicability of and compliance with the safe harbour provisions as outlined in the Corporations Act 2001 (Cth) for the directors.”
Mosaic had also confirmed that during this time, Deloitte had been advising the company on refinancing considerations that have previously been announced to the market.
“As noted in earlier announcements, the group has suffered from operational issues in recent months that have adversely impacted trade. These are being worked through by the directors, management and its advisors, and the group anticipates a recovery in its trading performance through the course of H1 FY25 once these operational issues are resolved.
“We also confirm that the senior secured creditor of the group remains supportive, and we continue to work with our suppliers to deliver for our customers.”
According to the administrators, they are seeking to determine the exact date of when Mosaic first entered safe harbour, and whether it exited and re-entered safe harbour within that time.
Alongside this, the administrators also confirmed that there was no directors and officers insurance policy in place. This type of insurance is designed to protect directors and management against litigation if its found they have failed in their role responsibilities.
Mosaic Brands is still trading, and the receivers looking after the business have not confirmed any store closures as of November 27.
The administrators, however, confirmed that there has been “a number of” redundancies at Mosaic’s head office late last month.
FTI Consulting is seeking a buyer of Mosaic Brands. The process has passed into the next round, and it is unclear how many of the initial 12 interested parties have progressed through. Final offers are due on December 13, 2024.