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Li & Fung explains impact of Aeropostale bankruptcy

Hong Kong headquartered trader Li & Fung says it is seeking advice over the impact of the Aeropostale bankruptcy protection move.
In a statement to the Hong Kong Stock Exchange, the company described the teen-targeting, fast-fashion chain Aeropostale as a long term customer.
“[Li & Fung]is one of Aeropostale’s key suppliers and serves it on an agency and principal basis.’ The two companies signed a 10-year Master Sourcing Agreement in February last year, with Aeropostale agreeing to source a minimum volume from the company.
“As of the date of the Bankruptcy Filing, Aeropostale owes to the company… US$17.5 million which is all overdue. Aeropostale has indicated in the Bankruptcy Filing that it intends to conduct business as usual during the Chapter 11 process while completing a financial and/or operational reorganisation.
“At the moment, the company also has outstanding orders on hand, work in progress, inventory and advance volume purchase discount (the “Continuing Business Exposure”),” the statement signed by Li & Fung chairman William Fung continued.
“The company expects to be able to continue to supply merchandise to Aeropostale after the Bankruptcy Filing but will seek professional advice to ensure that its future deliveries will be paid. If Aeropostale ceases to trade, the company may have to make provisions for the Continuing Business Exposure.”
Several weeks ago it emerged that Li & Fung was in line to become “the main supplier” of Aeropostale after a dispute between the US brand and its primary vendor MGF Sourcing. Based on those reports MGF would appear to be heavily exposed to Aeropostale as the agreement was to supply a minimum of US$240 million in goods annually.

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