SYDNEY: The relationship between Ksubi and its proposed restructuring partner is a long-standing one, with the two companies entwined in manufacturing and distribution since July last year.
Ksubi was placed into voluntary administration on January 11 this year, owing over $8 million. At the time of press, its administrators were negotiating a joint venture between the denim brand and Sydney-based streetwear operator Bleach.
Bleach director Mark Byers said creditors had agreed in principle to a new venture in which Bleach would purchase the Ksubi business as a major investor.
Byers told Ragtrader the proposed deal would be significant enough to cover Ksubi’s secured debt with Westpac, which comprised over half of the $8 million total, and to preferential creditors including staff.
He said unsecured creditors could expect a return on their money following the realisation of some existing Ksubi stock and receivables, with the percentage not yet confirmed.
The two companies have enjoyed a strong connection since 2001, with Ksubi co-owner George Gorrow serving as a creative director for Bleach. The company currently produces streetwear labels Insight, Something Else by Natalie Wood and several in-house programs for General Pants.
In July last year, Bleach entered into a manufacturing and distribution deal with Ksubi, triggered by Ksubi’s exclusive department store supply agreement with retailer David Jones. Byers said David Jones required that Ksubi find a strategic supply chain partner to ensure reliable delivery of product.
He said Bleach’s strong relationship with David Jones – involving its Something Else by Natalie Wood brand – and its ability to produce Ksubi’s technical garments helped secure the deal.
Byers said shortly after the deal was signed, it became evident that Ksubi did not have sufficient cash flow to continue operating without reviewing the structure of the business, leading towards its voluntary administration.
“The [Bleach] offer is significant and it is [Ksubi’s] best hope,” he said. “The alternative was to look at other opportunities, but the problem is that the Bleach and Ksubi businesses are now so intertwined.
“We have approximately 80,000 garments in production for Ksubi at this point in time, so that we can fulfil David Jones orders, General Pants orders, boutique orders, international distributor orders and international retailer orders over the next three months.”
According to a declaration from Ksubi administrators Said Jahani and Paul Billingham, of accounting firm Grant Thornton, Westpac first reviewed Ksubi’s financial position back in March 2009.
The declaration said Grant Thornton was then asked to update its report in September 2009, following a proposed restructure of the cult denim brand and its group of companies. This included a “high level” financial review of Bleach.
At the time of press, a statement from the administrators said an agreement could be reached within days.
“Although we are a fair way from finalisation, the broad support of creditors, the group’s lenders, its staff and customers to the joint venture proposal means that there is now the distinct prospect of the Ksubi brand surviving and flourishing,” Byers said.
Melinda Oliver