Almost £4m was owed by the wholesale arm of fashion brand Lavish Alice when it entered administration, it has been revealed.
A newly-filed document by Quantuma has also confirmed a number of job losses were made after the company was threatened with a winding up petition by HMRC.
Manchester-based Fast Fashion Collections International was eventually sold in a pre-pack deal to founding directors Matthew Newton and Lee Bloor last month.
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Lavish Alice-branded clothes have been worn by celebrities including Katy Perry, Kendall and Kylie Jenner, Ashley Graham, Eva Longoria, Jessica Biel, Nicole Richie, Elizabeth Hurley and Lindsay Lohan.
The brand was established in 2011 by the two friends and is now operating online only.
The wholesale arm had previously had deals with the likes of Asos, Nordstorm, Bloomingdales, Saks Fifth Avenue, Selfridges and Harvey Nichols.
According to Quantuma's document, which has been filed with Companies House, four of Fast Fashion Collections International's 25 employees were made redundant on February 6. They had been part of the retail division of the business, which included concession stores in Selfridges, and was excluded from the sale.
In a statement issued to BusinessLive last month, Lavish Alice said none of its 20 employees based at its head office had been impacted.
In a new statement, co-founder Matthew Newton said: "Lavish Alice, the brand, is now benefiting from the discontinuation of wholesale operations, as previously announced.
"We have successfully satisfied all obligations, and we’re continuing to honour all outstanding D2C customer refunds. All staff have retained employment. All key suppliers have retained future business. Everything else remains academic.
"I have recently, and personally, hosted all of our International partners in recent weeks, to agree a viable way forward, which significantly adjusts the reported position.
"Our direct-to-consumer model is, as reported, breaking records and we plan to announce a Hollywood A-List celebrity collaboration, imminently."
What have Quantuma said?
In its document, Quantuma said: "With various lockdowns and restrictions imposed during the Covid-19 pandemic in the United Kingdom, the core trade, being an event wear fashion retailer, was significantly affected.
"As a result, the company incurred significant losses over a two-year period along with accompanying debts from support provided during the pandemic.
"Despite the business's year end results for 2022 showing significant increases in sales and revenue, the business had been struggling with historic liabilities accrued during the pandemic.
"Meeting financial obligations for a CBILs loan, repayment interest rates, global supply chain issues, increased freight costs and currency exchange losses also caused ongoing financial challenges.
"The company had significant historic HMRC liabilities and in December 2022, HMRC issued a demand to the company for immediate payment.
"The company did not have sufficient funds to make payment and it was considered that the company was insolvent in accordance with S123 of the Insolvency Act 1986 so far as 'the company cannot pay its debts as and when they fall due' and without a significant injection of working capital to meet immediate and short-term creditor obligations, which was considered unlikely and they had no alternative other than to consider a formal insolvency process."
How the company entered administration
Quantuma was first approached by the company on December 22, 2022, to provide advice over its finances.
The firm said the directors said their company was "struggling to pay its liabilities as and when they fell due" and that they had received a threat of a winding up petition from HMRC.
Quantuma said that following a review of the finances, a formal insolvency process was required. The directors then filed a notice of intention to appoint administrators (NOIA) on December 30, 2022, to protect the company's assets from any enforcement action.
At the same time, the directors were actively marketing and pitching the Lavish Alice brand, which was held in a separate company.
Quantuma said that a sale of the brand "would also benefit the outcome for the creditors of the company due to anticipated enhanced asset realisations and mitigation of certain creditor claims via a pre-packaged sale to a purchaser of the associated company's brand".
The administrators added that Fast Fashion Collections International had sufficient working capital to continue to trade while the Lavish Alice brand was marketed and a second NOIA was filed on January 16, 2023.
Quantuma said: "During this time, the directors liaised with Quantuma to review contingency planning if the company's stock assets had to be realised via a short period of trading.
"This would wield a less desirable outcome for the company's stakeholders and the directors continued to meet prospective buyers.
"A sale of the brand would facilitate a better outcome for all parties and at the point of the expiry of the second NOIA an offer was received from a third party for the brand, which was being considered by the associated company."
A third NOIA was filed on January 30, 2023, to provide protection while a deal was worked towards.
Quantuma added: "Ultimately, the directors did not consider that the offer received matched their expectations and they rejected it."
The administrators then concluded a pre-pack sale of Fast Fashion Collections International's business and assets to Lavish Alice Retail, on February 10.
An initial payment of £1 was received on completion while a further £27,100 was paid on February 28. A further £27,000 is expected to be received on March 28.
Quantuma confirmed that the business and assets were secured by obtaining a personal guarantee from Matthew Newton and Lee Bloor.
Fast Fashion Collections International's finances
As a secured creditor, Close Brothers was owed £96,892 when the company entered administration. Quantuma said it is anticipated that the firm will be repaid in full.
There was also an outstanding balance due to HMRC of c.£1.2m. Quantuma also said it is anticipated that HMRC will be repaid but the final total has not yet been confirmed.
Over £2.4m was also owed to unsecured creditors when Quantuma was appointed.
According to Quantuma's document, Fast Fashion Collections International turned over £589,205 in the year to October 31, 2022. Its turnover had previously totalled £6.5m in 2021 and £5m in 2020.
It also made a pre-tax loss of £46,171 in the 12 months to October 31, 2022. It also lost £365,681 in 2021 and £504,199 in 2020.
In a statement issued to BusinessLive last month, Lavish Alice said its wholesale revenue had totalled more than £5m in 2022 while gross revenue was over £17m in 2022.
What has Lavish Alice said?
In a statement issued to BusinessLive last month, Lavish Alice said that while its website has "experienced significant growth and revenue continues to thrive", the wholesale arm of the business has "grappled" with historic global supply chain issues, increased freight costs, currency exchange losses, wholesale cancellations, late delivery charges and "squeezed" profit margins, which have "caused financial challenges".
The company added it has now "streamlined its offering" to become an online-only retailer.
Director Matthew Newton said: "The Lavish Alice journey is only just beginning. We have traded throughout 2022 and demonstrated consistent post pandemic growth.
"Demand for the brand and website sales are at a record high with revenue up +71% year-on-year and +76% pre-pandemic levels, across 100,000 transactions."
He added: "We took the difficult decision to prioritise our ongoing efforts and resource into the most profitable part of the business.
"Our 'online-only' and 'online exclusive' proposition will bolster our D2C growth even further, with customers naturally crossing to us directly from our wholesale partners.
"Wholesale margins became increasingly squeezed and harder to service. When carefully balancing their financial penalties, order cancellations, marketing contributions, early settlement discounts along with increased cost of sales and lower margins, it became an impossible challenge. Our resource is best placed maintaining the record growth of pureplay.
"The brand is now able to move forward with a renewed focus on our 600,000 strong D2C client list and we remain in a robust position to deliver on our significant growth plans for 2023."
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