Li & Fung affected by US Aeropostale filing for Chapter 11
Li&Fung wishes to inform that Aeropostale, Inc.(“ARO”), whois one of the Company’s long term customers, has filed for bankruptcy protection (the “Bankruptcy Filing”) under Chapter 11 of the U.S.Bankruptcy Code. The Company is one of ARO’s key suppliers and serves ARO on an agency and principal basis
In February 2015, Li&Fung signed a 10-year Master Sourcing Agreement with ARO, with ARO agreeing to source a minimum volume from Li&Fung. As of the date of the Bankruptcy Filing, ARO owes to the Company a total accounts receivable of USD 17.5 million, which are all overdue. ARO has indicated in the Bankruptcy Filing that they intend to conduct business as usual during the Chapter 11 process while completing a financial and / or operational reorganization.
At the moment, Li&Fung also has outstanding orders on hand, work in progress, inventory and advance volume purchase discount (the “Continuing Business Exposure”). The Company expects to be able to continue to supply merchandise to ARO after the Bankruptcy Filing, but will seek professional advice to ensure that its future deliveries will be paid.
If ARO ceases to trade, Li&Fung may have to make provisions for the Continuing Business Exposure. Li&Fung will continue to monitor the situation closely and will inform the shareholders of any significant development in accordance with the Listing Rules. Meanwhile, shareholders and potential investors of the Li&Fung are reminded to exercise caution when dealing in the securities of Li&Fung.