FASHION CHAIN A-Wear has been placed in receivership and sold for the second time in five months, after departing owners Hilco said the “continued funding of escalating losses was no longer acceptable”.
All 460 full and part-time jobs at the chain, which has 32 stores in Ireland, will be retained by the new owners, the receiver Jim Luby of McStay Luby confirmed, while the stores continue to trade.
The company has been acquired from the receiver by a group of international investors, headed by British businessman Michael Flacks of the Flacks Group, and includes commercial property investors Jesta Group. Dublin firm Key Capital advised the Flacks on the deal.
“My colleagues and I are here to develop and grow this business, not shrink it,” said Mr Flacks.
“A-Wear has been operating in a challenging trading environment and needs investment and a new strategic direction.”
He cited “excellent potential” to work with homegrown Irish designers as part of this.
Hilco blamed the decision to sell the loss-making company on the rent policies of Nama and the Department of Finance.
“Although we have found landlords, including Nama-borrowers, to be extremely helpful to A-Wear as an indigenous retail chain, I fear that the recent pronouncements from Nama and the finance department do not go far enough to prevent a wholesale departure of quality, international retail from the Irish market,” said Paul McGowan, chief executive of the Hilco Group in Europe.
Hilco, which specialises in restructuring distressed businesses, acquired A-Wear from Alchemy Partners in October.
Hilco said yesterday that the chain had an unsustainable debt burden of more than €70 million as a result of Alchemy’s highly leveraged buyout of the company from Brown Thomas in 2007, a deal in which Key Capital acted for the vendors.
Hilco said it had implemented a series of restructuring activities, including cutting head-office jobs, closing the loss-making UK business and negotiating “substantially improved” rental.
It said it contributed more than €3 million in additional working capital to the business, including almost €600,000 in the past week, to ensure salaries were paid, while progress had been made on repaying historic liabilities to landlords and the Revenue, it added.
In December, the Government decided to backtrack on the mooted retrospective banning of upward-only clauses in leases.
“Rental levels across the country are simply extortionate for the new retail reality,” said Mr McGowan. “Landlords are either unable or unwilling in many cases to implement reductions that would preserve a diverse retail environment in the Irish market.
“I am aware that a number of international retailers are reviewing their exposure to Irish retail as a result.”
Hilco Capital Ireland chief executive Larry Howard, who joined Hilco last September from Dunnes Stores, said A-Wear was in a position under its new ownership where it could return to profit without the burden of unsustainable debts. “One of the few Irish multi-label fashion brands can live to fight another day,” he said.
