Cleveland, Tenn., businessman Allan Jones said today he will continue his efforts to buy the assets of the bankrupt Hardwick Clothes Inc., even though a federal court ruled Thursday that he can recover only about a third of what he expects to spend arranging the purchase in the event the assets are sold to another party.
Jones, founder and CEO of the payday lender Check Into Cash, has offered $2 million to buy the 134-year-old maker of men's suits under a so-called "stalking horse" bid for an auction planned in May. Jones had asked to recover more than $312,000 he is spending to prepare for the purchase and hire a new CEO, if he is not the successful bidder at the auction. U.S. Bankruptcy Court Shelly Rucker on Thursday set a limit on such breakup fees of $100,000.
"While we were disappointed with the amount the court set as the reimbursement for the expenses we have incurred in the event we are not the successful bidder, we respect the very difficult decision the court was forced to make in light of the objection filed by the PBGC," Jones said in a statement released today. "We accept Judge Rucker's decision and plan to move forward in saving this company and its many loyal employees."
Jones said he wanted to assure the 220 employees at Hardwick Clothes of his continued interest despite initial objections to the sale process by the company's biggest creditor, the Pension Benefit Guaranty Corp.. The PBGC, the government agency that took over Hardwick's underfunded pension plan, complained that the terms of Jones initial purchase plan were too quick to entice other bidders and too expensive for the company if he is not successful.
Jones maintained he is convinced Americans can still make suits profitably.
"Hardwick is the oldest privately owned suit maker in the USA - founded in 1880 in Cleveland, Tenn. - and we are not giving up that longstanding tradition without a fight. " he said. "Surprisingly, the PBGC is delaying and potentially threatening everything we are working to rebuild."
At Thursday's hearing, the PBGC also asked whether the company had considered shutting down and liquidating its assets to get more money for the PBGC and other creditors.
"From the hearing, it became obvious that the PBGC is strongly suggesting the idea of liquidation," Jones said. "We don't feel closing down USA's oldest suit maker makes any sense."
Last fall, the PBGC demanded payment on unpaid premiums from Hardwick last year. When the suit maker couldn't pay such expenses, the company filed a Chapter 11 petition in December to reorganize and try to sell the company's assets under protection of the federal bankruptcy court.
"The biggest asset is not on the balance sheet," Jones said. "It's the 134 years of tradition and all the long-term employees."
Jones said his $2 million purchase offer "is just a drop in the bucket of what it will take to turn this company around."