FTI Consulting – the administrators of Mosaic Brands – has reported that there will not be any money to pay debts owed to the unsecured creditors surrounding the collapse of the apparel group.
In a statement to the market, also posted on the ASX, FTI Consulting reported that the receivers (being KPMG) are “cautiously optimistic” that amounts owed to employees of the Mosaic Group will be paid in full, however the timing of the payment to employees is currently unknown.
There is also not expected to be sufficient funds from the realisation of assets to pay amounts owed to secured creditors in full.
“This means there will not be any money to pay debts owed to unsecured creditors (which includes suppliers and landlords) for goods and services supplied before 28 October 2024 (being the date of appointment of Receivers and Managers and Administrators).”
Mosaic Brands fell into voluntary administration in October last year. It key retail brands Millers, Noni B, Katies and Rivers have since been pushed into wind down phase.
The current estimates of claims of creditors exceed $318 million and include $54 million owed to secured creditors, $22 million to priority unsecured creditors, and $242 million to other unsecured creditors.
The latter amount does not include contingent claims such as landlord claims for breach of leases and any residual gift cards.
According to FTI consulting, the only possibility of funds becoming available to pay unsecured creditors is if either the Mosaic Group is placed into liquidation and the liquidator is successful in recovering money from potential legal actions, or if a deed of company arrangement (DOCA) is proposed, with the party agreeing to pay money into a fund that would pay a portion of the amounts owed to suppliers and unsecured creditors.
A DOCA proposal would avoid the companies being placed into liquidation.
“No proposal has been received to date,” FTI Consulting reported. “If a proposal is received, this will be communicated to creditors.
“Although there remains an opportunity for DOCA proposals to be made, at present there is no certainty that a DOCA will be proposed. If the companies enter liquidation, then it also remains unclear whether any proceeds could be recovered for the benefit of creditors in liquidation.”
FTI added that the prospects of recovering funds for the benefit of creditors in liquidation is under the consulting firm’s review as administrators, which they are continuing to investigate.
“A summary of those investigations will be included in our report to creditors which will be sent prior to the second meeting of creditors.”
The second meeting of creditors will be called and held in May or June this year, with the report being issued a week prior to the meeting being held.