Line 7 creditors left $5 million short

Line 7's nine stores were closed after stock sales. Photo / Brett Phibbs

Creditors owed $5 million by collapsed clothing firm Line 7 are unlikely to be paid.

The prominent New Zealand sports and casual wear label called in the receivers in July, blaming foreign currency exposure, rising commodity prices and the recession for its troubles.

Receivers KordaMentha said at the date of the receivership the company had assets of $8.16 million including stock. It also had its brand and intellectual property.

It owed $8.08 million to secured and preferential creditors.

However there was an additional $4.98 million outstanding to other creditors.

"While it is early in the receivership we do not anticipate that there will be funds available for distribution to this class of creditor," receiver Grant Graham said in his first report.

KordaMentha was in discussions with more than one potential buyer for the Line 7 business. It had issued 57 information memorandums to interested parties, he said.

A receivership sale had been held to clear stock, and the company's nine retail and two outlet stores had been closed.

Line 7 made its name in quality sailing gear and had a long association with New Zealand's America's Cup teams.

The three sectors of its business were agricultural and marine outdoor clothing, and casual wear. The clothes were largely made in China.

Owner and director Ross Munro - who bought the business out of receivership 19 years ago - said in July that Line 7 had been caught by the economic decline and he had failed to read the market accurately.

He said the business didn't hedge itself against big falls in the dollar "which we normally did but we just didn't think it would drop as aggressively as it had, so that had a significant impact for this season on our margins".

As well, its customers had been slow to pay their bills and the firm hadn't reacted quickly enough in cutting overheads, he said.

The ANZ National Bank was owed $7 million plus $600,000 in foreign exchange contracts, the receivers said.

However a number of the contracts were yet to close out, and due to fluctuations in currency exchange rates the exposure had increased since the receivership.

Preferential claims to employees totalling $251,000 had been paid, as had a debt of $61,000 to Customs New Zealand.

Customs had attempted to have Line 7 liquidated over the debt.

The Inland Revenue Department was owed $110,000 in GST and PAYE but the receivers anticipated that this would be paid.

Meanwhile Ross Munro has taken over as the sole Australasian licensee for casual wear brand Canterbury.

Last month British retail chain JD Sport bought Canterbury of New Zealand, after the company's European arm was placed in administration.