AN EXPENSIVE MOVE to open a store in New York City led to the collapse of the Orla Kiely retail fashion empire, according to administrators of Ms Kiely’s fashion clothing business.

The collapse of Kiely Rowan plc with debts of €8.4 million in September 2018 sent shock waves across the retail and fashion industries, as the long-established business was on an upward trajectory having reported increasing revenues and operating profits for fiscal 2017.

Now, the second progress report by joint administrator, Chris Newell sheds light for the first time on the specific reason behind the clothing business collapsing – Ms Kiely’s separate licensing business continues to expand today.

As part of a 29 page report lodged with Companies House in the UK, Mr Newell states “part of the explanation for the failure of the business appears to be the amounts utilised to fund the business in the US entity”.

Mr Newell states: “It appears that the opening of a new shop in New York created a drain on the cash flow, causing the requirement for additional borrowing which eventually led to the collapse of the whole group.”

Mr Newell adds that “investigations into this matter and the actions of the directors in funding the US project to the detriment of the remainder of the group is currently ongoing”.

Ms Kiely and her husband, Dermott Rowan were the company’s directors at the time of the collapse, and Mr Newell also states that the focus of the joint administrators is now on fully exploring the flow of funds through the Orla Kiely group companies – Killyon Stem LLP and Kiely Rowan plc.

Mr Newell further states as part of the joint administrator’s statutory duties, an investigation of the company directors was completed.

He states: “In this regard, a confidential report was submitted to The Insolvency Service on 21 December 2018.”

The progress report makes grim reading for creditors of the firm who are owed a total of €8.4m.

Mr Newell states that secured creditor Metro Bank PLC was owed €2.5 million at the time of the business collapse and he states: “It is not anticipated that the secured creditor will be paid in full”.

Mr Newell states that unsecured creditors were estimated to be owed €7.1m in the directors’ Statement of Affairs and he reports that to date 86 claims have been received from unsecured dividends totalling £5.5m.

However, Mr Newell states: “It is not anticipated that a dividend will be paid to unsecured creditors.”

The report states that the ‘Irish tax and Customs’ are one of the unsecured creditors and are owed €115,000.

Mr Newell states that preferential creditors relating to holiday pay and wage arrears were estimated to be €113,000 and to date, 38 claims have been received totalling €48,000.

Mr Newell states: “It is likely that there will be a dividend to preferential creditors, however, the quantum and timing of the dividend will depend on the realisations and costs.”

In respect of the separate administration of connected Orla Kiely firm, Killyon Stem LLP where unsecured creditors have made clams totalling €2.3 million, Mr Newell anticipates that there will be a dividend available – but it is likely to be around 0.02p in the pound.

Mr Newell reports that the two periods to date of the administration of Kiely Rowan plc has produced a surplus of €131,000.

Mr Newell has realised €460,000 from the sale of stock. However, the administrators’ fees to date of €127,000 along with agents and valuers fees of €177,000 have been the largest costs during the administration.

In a press interview earlier this year, Ms Kiely described the collapse of her clothing business as “a bereavement”.

She said: “We did everything we could to save the business and to watch it fail was devastating.”