Fashion chain Ksubi could be rescued from administration due to a proposed joint venture between the company’s shareholders and major manufacturing partner Bleach.
The company is just in the initial stages of a deal, with creditors indicating their support at a meeting yesterday, just one week after the company collapsed with debts over $8 million.
Administrator Grant Thornton said in a statement the creditors of the group met for the first time yesterday after the company was placed into voluntary administration.
During the meeting, creditors were told Ksubi had continued to trade, with Grant Thornton administrator and national head of recovery Paul Billangham advising creditors he had received several unsolicited expressions of interest to purchase the brand.
However, Billingham also advised creditors of a proposal concerning Ksubi and manufacturing group Bleach, which would see the company continue operation in a joint entity.
“The relationship between Ksubi and its manufacturing partner at both the operational and creative levels meant that to complete a deal without the manufacturer’s involvement would be problematic.”
The statement noted creditors gave their in principal approval to the venture, with negotiations to continue over the next few 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” Billingham said.
The brand, which was founded by Dan Single and George Gorrow in 2000, fell into administration due to what the company said was a struggle “to achieve the margin necessary to fund the growth and development of the brand”.
“We are and will remain fully committed to the Ksubi brand and in assisting the administrator to achieve the best possible outcome,” the paid sair in a statement, adding that the move was the only way to “ensure the future” of the brand.
The label’s two Australian stores, and single New York location, have remained open during the administrative process, with Billingham and colleague Said Jahani saying last week they would attempt to “preserve the inherent value of the business”.
There have been a number of reasons put forward regarding Ksubi’s collapse, including its growing debt levels. However, these claims come as Gorrow and Single were included in the BRW Young Rich list in September 2009, valued at about $24 million.
There are also indications the company may have collapsed due to the volatile Australian dollar. Last week Jo-Ann Kellock, executive director of the Council of Textile and Fashion Industries of Australia, said the company suffered when the dollar dropped 30% during the financial crisis, alongside increases in material prices.
“You’ll find there are pockets of people working on skinny margins and high volume who were impacted early on when the dollar dropped very quickly… Depending on how you hedged and how you used the dollar, then you may have costs that you can’t reign in quickly enough.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
