Irish arm of US fashion retailer American Eagle to be wound up
Posted on 10th January 2022 at 21:16
US owner terminates licence agreement as financial targets were missed due to impact of Covid-19 on sales, court is told
The High Court has made orders winding up the Irish-based European franchise holder for the well-known US clothing brand American Eagle.
The fashion brand had operated two stores in Ireland, one at the Jervis Shopping Centre in Dublin and the other at the Whitewater Shopping Centre in Newbridge, Co Kildare, with some 24 employees.
The franchise holders AEOEU Limited, which has several subsidiaries in Europe, including its Irish subsidiary AEO Retail (Ireland) Unlimited, said their insolvency arose after the brand’s US owner terminated a licence agreement with the effect of preventing the Irish-based entities from selling any American Eagle products.
The court heard that agreed targets contained in a 2019 licence agreement allowing the Ireland-based entities sell American Eagle Outfitters (AEO) goods in Europe had not been reached.
That agreement required the licence holder to have a certain number of stores opened in Europe within the first three years.
Those obligations were not reached due to the Covid19 pandemic, the companies claimed.
At the High Court vacation sitting on Monday, Ms Justice Miriam O’Regan said she was satisfied to make orders appointing experienced insolvency practioners Ken Fennell and James Anderson of Deloitte as joint provisional liquidators to both AEOEU Limited and the Irish subsidiary.
The two firms have a registered address at Jaisun House, Dundrum Business Park in Dublin 14.
The provisional liquidators, who were granted various powers by the court, were appointed on an ex-parte basis.
The directors of AEOEU Limited are Sunil Shan of Donnybrook, Dublin 4 and Nishith Soneji with an address in Hertfordshire in the UK who the court heard are experienced in the retail trade. Mr Shan is the sole director of the Irish subsidiary.
Seeking the provisional liquidators’ appointment, Kelley Smith SC for the companies said that while the targets regarding store openings were not reached the Irish firms continued to work with the American brand owner and took various steps including expediting the brand’s European e-commerce platform.
During the course of the licence agreement the Irish firms made payments of more than $17 million to AEO, counsel said.
Between 2019 and the end of 2021 it is estimated that the companies generated revenues of about €34.5 million, counsel added.
However, despite the companies’ best endeavours, sales channels were hampered by the pandemic and the various Covid-19 related lockdowns.
Last September, AEO said there was an overdue balance of $7.7 million due to it from the Irish companies. Payment plans were proposed but could not be agreed.
The dispute also became the subject of arbitration in the United States, the court heard.
In late December, AEO issued a termination notice, which prevents the Irish companies from selling or using any of AEO’s products, counsel said.
As the companies cannot sell any American Eagle stock, they are insolvent and their directors have resolved that the firms should be wound up, counsel said.
The main EU parent has debts of about €12 million with assets of just more than €10 million.
As well as the two Irish stores, AEOEU Ltd operated outlets in Switzerland and the Czech Republic. It had two unopened stores in London.
It also operated 14 concessions in stores in Spain, Portugal, Andorra, and Hungary and had operated an e-commerce platform to sell American Eagle products. The matter will return before the courts later this month.
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