Cleveland, Tenn., businessman Allan Jones will continue his efforts to buy the assets of the bankrupt Hardwick Clothes Inc., even though he says he is having to fight claims by a government agency that is helping to insure the company's former retirement plan.
Jones had asked to recover more than $332,000 he expects to spend to prepare for the purchase and hire a new CEO, if he is not the successful bidder for Hardwick at a bankruptcy auction next month. Hardwick's largest creditor, the federal Pension Benefit Guaranty Corp. [PBGC], objected to paying so much in breakup fees.
U.S. Bankruptcy Court Judge Shelly Rucker on Thursday limited Jones' recovery to only $100,000 if his bid is rejected.
In a statement Saturday, Jones said he was disappointed in the amount but respects "the very difficult decision the court was forced to make in light of the objection filed by the PBGC."
He added: "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 Hardwick's 220 employees of his continued interest and said he expects to spend millions of dollars more to revive Hardwick, Cleveland's oldest manufacturer and the oldest remaining domestic maker of men's suits.
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 agreed to give more time for other potential bidders but said he remains 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 in the statement. "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.
But, Jones said, "We don't feel closing down USA's oldest suit maker makes any sense."
Tommy Hopper, president of Hardwick, said he wasn't sure how much selling off buildings and inventory would yield for creditors. The company's 40-acre plant site in Cleveland was appraised in 2011 at $3.7 million, but Hopper said an auction of the building today might not generate that much money. He said the company's inventory of suits and other clothing materials "would probably only bring 20 cents on the dollar."
Jones said he hopes to keep the business alive both help his hometown and make money on his investment, if he can build upon Hardwick's experienced staff.
"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."
Last fall, the PBGC demanded Hardwick catch up on unpaid premiums from last year. The company said it couldn't pay such expenses and filed a Chapter 11 petition in December.
Contact staff writer Dave Flessner at email@example.com or 423-757-6340.