Mosaic Brands in ‘safe harbour’; Deloitte in wings
ASX-listed clothing retailer Mosaic Brands, where Richard Facioni is chairman, has entered so-called “safe harbour” as its directors seek to trade through a difficult period for the business.
Safe harbour laws give directors of Australian companies protection from personal liability for debts incurred by an insolvent company, provided they are taking actions that could restructure the group and lead to a better outcome for creditors.
The $32 million convertible note issue will help Noni B owner Mosaic Brands continue to trade until lockdowns have lifted and stores reopen. Cassandra Hannagan
One of the conditions of safe harbour is that the company takes advice from expert external advisers, such as bankers or lawyers.
Mosaic, whose brands include Katies, Millers, Noni B and Autograph, is understood to be working with Deloitte’s distressed advisory division, run by Sam Marsden.
Facioni declined to comment when contacted by Street Talk on Tuesday. Mosaic shares last traded at 5.5¢, giving the company a market value of $9.33 million.
As reported by this masthead, Mosaic Brands has experienced disruptions as it migrates to a fully integrated logistical supply chain and distribution system. Delays in getting fresh inventory for the key Mother’s Day trading period crunched earnings and sales in the fourth quarter, it said in June.
That same month, Mosaic’s long-serving chief financial officer, Luke Softa, resigned, and director Jackie Frank left. Erica Berchtold, the former CEO of online retailer The Iconic, took over the top job at Mosaic from Scott Evans in April.
Mosaic uses about 100 suppliers for its various brands, but two large Chinese suppliers alleged on social media that they had not been paid for products already delivered to Mosaic.
Claiming safe harbour – a position which does not need to be disclosed under continuous disclosure requirements – allows directors to quietly address the business’ financial distress without using formal insolvency mechanisms such as liquidation or voluntary administration.
Several retailers have claimed safe harbour – then successfully exited – in recent years, particularly during the COVID-19 pandemic. Mosaic Brands will be closely watched in coming months, given it’s rare for a significant entity to be revealed as being in safe harbour while still trading on the ASX.
Should major shareholders including chairman Facioni, investment company Alceon Group, which holds a 19.4 per cent stake and has representatives on the board, and Australian retailer Spotlight Group – owner of 19.7 per cent – choose the VA route, an external administrator is expected to be appointed.
Spotlight invested $10 million in Mosaic Brands in September 2021, as part of a $32 million capital raising. In that deal, Mosaic Brands raised $32 million via the sale of convertible notes that would offer an 8 per cent coupon and have a three-year term.
The convertible notes were expected to rank behind senior lender ANZ Banking Group’s loans to the company, and ahead of its equity.
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