AUCKLAND: Leisurewear brand Line 7 was brought to its knees by increasing commodity prices and a failure to safeguard itself against foreign currency fluctuations, receivers of the embattled company have found.
The iconic retail and wholesale business was put into voluntary receivership by co-owner Ross Munro at the end of June after collapsing beneath a debt of more than $A10 million.
At the time the brand serviced a number of wholesale accounts across Australia and operated nine independent retail stores and two outlet stores across New Zealand. All retail sites have since been closed.
In the first creditors’ report released since their appointment, receivers Grant Graham and Brendon Gibson of KordaMentha said the business had first encountered problems as early as 2008, with reduced consumer demand putting additional pressure on margins and leading to a reduction in revenue.
According to the report, Line 7’s biggest secured creditor was the ANZ National Bank, which was owed $A5.72 million. That number is expected to increase upon the realisation of several foreign exchange contracts which would expose the bank further.
The amount owed to unsecured creditors was believed to be around $A4.06 million, but Graham said it was unlikely there would be enough funds available for this debt to be paid.
The report said the company currently had a book value of around $A6.6 million, the majority of which was in stock.
It is understood employee entitlements to the value of $251,000 have been paid, as has the $50,000 owed to the New Zealand Customs Service.
The report noted the wholesale division of the brand had been advertised for sale across New Zealand, with parties indicating they may be interested in either part or all of the company’s wholesale arm.
At the time of press, nearly 60 brands had expressed interest in acquiring the company.