Mosaic Brands, an Australian fashion behemoth known for its popular house brands such as Noni B, Millers and Rockmans. In October 2022, the company succumbed to a voluntary administration. The company’s fiscal misadventures have already sent shockwaves around the globe. Nearly 40,000 workers in 23 factories in Bangladesh are being affected. Having racked up over $361 million in debts to creditors and suppliers, Mosaic Brands now has little avenue left to emerge from months of worsening financial liabilities.
The company’s collapse has since left thousands of factory owners in Bangladesh, including Jabed Ahmed, deep in debt. Mosaic Brands already owed Ahmed about $2.5 million. That debt is just a small sliver of a shocking $30 million owed collectively to at least 23 other factory owners. This creates a precarious situation for the manufacturers. It most significantly disappoints the workers who service hope in these businesses—workers who rely on these establishments for their own livelihoods.
Financial Mismanagement and Debt Crisis
Mosaic Brands’ U-turns ended after their financial troubles were publicly exposed by outstanding orders to Bangladeshi suppliers. The corporation had shipped goods but stopped paying for them, leading to an exploding figure of debt crisis. In August 2022, Deloitte offered Mosaic Brands a suite of refinancing options. Taking action, these steps were not enough to avert catastrophe.
Pauline Flynn, director of Ferrier Hodgson, lawyer for Darren Vardy, whose office Insolvency Options – the creditors of Mosaic Brands. In fact, if Vardy is to be believed, there’s a great chance that any suppliers or workers abroad will receive zero payment. The company’s continued financial calamities are a testament to the utter bankruptcy of transparency and fiscal stewardship.
“This could be a landmark if directors are sued for trading while insolvent.” – Professor Jason Harris
Due to its store closures, Mosaic Brands has more than $3 million in unsold garments stored in a warehouse. Plus, they have another debt to pay – to the owners of their factories. His company had sent this product to Australia with no upfront payments. This new development only creates more uncertainty for creditors and workers. HBOD’s operation has greatly changed.
Impact on Bangladeshi Workers
The potential collapse of Mosaic Brands has short-term and long-term dire consequences for nearly 40,000 workers in Bangladesh. Most of these people depend on their lines of work for their financial security and ability to support their families. As Nafis Ud Doula, one of many impacted suppliers who touched on these sentiments, put it, “There was a desperation out there.”
“They were tying us up with new orders just to get old payments.” – Nafis Ud Doula
And from his testimony, you can feel the frustration that other suppliers are getting. All of them have long since closed down due to the years of delays and unpaid bills. Gazi Abdullah Al Mustafiz echoed these sentiments passionately. He pointed out that Mosaic Brands has not yet given any dates of payment for the overdue owed funds.
“They haven’t given any payment date.” – Gazi Abdullah Al Mustafiz
Mr. Uddin, another impacted factory owner, further illustrated the tragic depth of this crisis.
“Around 40,000 workers are involved with these 23 factories. If there is no solution to this issue, it would be difficult for all.” – Mr. Uddin
These damages go far beyond just economic losses. They displace whole communities and ecosystems that rely on these factories for their livelihoods.
Legal and Ethical Considerations
Advocates and legal experts are starting to raise concerns about the legal implications after the collapse of Mosaic Brands. Professor Jason Harris voiced his disappointment with the lack of coverage of the audit report. He felt it might have surfaced possible problems much earlier.
“I’d also raise the question of why more wasn’t made of the audit report.” – Professor Jason Harris
He noted that the impacts of this failure go beyond economic measures. They’re about people’s lives and livelihoods.
“It’s not just business — it’s people’s lives.” – Jabed Ahmed
This development would further test Australia’s safe harbour provisions introduced in 2017. These provisions are designed to insulate directors as they make efforts in good faith to turn around distressed corporations. In fact, creditors will max out at receiving just 17.5% of what they are due— even assuming the best case scenario. Such uncertainty begs the question of how effective such provisions really are.
