MELBOURNE: Over 28 trade representatives descended on the first meeting of creditors for collapsed womenswear chain Brown Sugar, with initial claims totalling $15.4 million.
The directors of Brown Sugar appointed Deloitte Corporate Reorganisation Group partners Sal Algeri and Tim Norman to the business on August 4. Freshly retrieved documents from the first creditors meeting revealed the retailer had been suffering consecutive losses over the last two years, with holding company Associated Retailers Limited (ARL) no longer able to provide ongoing support.
Unsecured creditors immediately queried the large negative receivables balance in the company’s balance sheet, with administrators confirming the liability related to an intercompany loan from ARL. ARL recorded the largest claim of creditors present at the meeting, reportedly owed $13.85 million.
Key trade claims included Shanghai Silk Group Co Ltd ($613,910), Makey Fashion Limited ($361,990), Toll Global Forwarding ($207,674), KF Asia Limited ($70,966), KBC Manufackur Koechlin ($70,966), Oz Clothing Pty Ltd ($62,504), Visual Solutions Australia Pty Ltd ($41,584), Cooper Watkinson Textiles ($25,956) and Tailors Trimmings (Aust) Pty Ltd ($21,153).
Cooper Watkinson Textiles, which was also affected by the collapse of Bettina Liano this year, queried administrators on the impact of their appointment on womenswear brand Meredith. Algeri confirmed the brand was a seperate legal entity to the company and would not be affected by the administration. Meredith operates around 12 retail sites, as well as an online store and a national stockist base.
Representatives for trade creditor Bluemoon Fashions also queried entitlements, stating that historically the company’s debt had been settled with cheques in the name of ARL. Administrators claimed they would need to investigate whether Bluemoon could recover the company’s indebtedness from ARL in light of this relationship. Administrators would not be drawn to comment on the estimated return to unsecured creditors prior to the release of an official report.
While a full creditors report for Brown Sugar was not available at time of press, minutes from the first meeting also touched on several factors behind its collapse. These included successive management changes since 2009; poor product and stock ordering; decreasing net profit; adverse trading conditions in the current retail climate; and rising occupancy costs on a static sales base.
ARL purchased the 36-year-old Brown Sugar in 1995, with its founder Brian Ambler remaining as general manager for 11 years, driving expansion of the Victorian label into New South Wales and Western Australia. ARL is the buying and marketing group behind chain operator Mensland, with acquisitions later including Toyworld, Shoex, Sportscene and Compleat Angler. It is understood Ambler retained selected rights to Brown Sugar, with the sale of the ‘Brown Sugar’ trading name subject to his consent. A potential buyer for the business had not been announced at time of press.
Smaller claims from trade creditors at the meeting included Bluemoon Fashion ($25,077), PR Packaging ($25,034), Retail Management Computer Systems ($20,794) Unit 3 (HK) Ltd ($16,065), Karyn Fitts ($13,887), TF Sunny Garment Co Ltd ($13,628), Complice Pty Ltd ($7,618), Stacey Pedder ($6,888), Dargate Pty Ltd ($4,401), Bradmill Pty Ltd ($12,034).
At the time of its collapse, Brown Sugar operated 40 stores across Victoria, New South Wales, Tasmania and Western Australia with 50 full-time staff and 150 part-time and casual employees.
