WHAT'S NEXTA hearing is set for 10 a.m. Thursday in federal bankruptcy court in Chattanooga to consider the sale procedures for a scheduled May auction of Hardwick Clothes Inc.COMPANY AT A GLANCEName: Hardwick Clothes Inc.Founded: 1880 by C.L HardwickOwner: Privately owned operating under bankruptcy court supervisionCEO: Tommy HopperStaff: 225 employees in Cleveland, Tenn.Primary debt: $7 million underfunded pension planSource: U.S. Bankruptcy Court filings
The proposed sale of America's oldest privately owned clothing maker is too quick and may not yield the best deal for creditors of the bankrupt company, according to government attorneys.
The owners of Hardwick Clothes Inc., which has been making tailored suits and other clothes in Cleveland, Tenn., since 1880, had hoped to emerge from bankruptcy after a proposed $2 million sale next month to Cleveland millionaire Allan Jones. But the same agency that Hardwick owners blamed for pushing the company into bankruptcy last year is now objecting to the proposed sale to Jones.
The U.S. Pension Benefit Guaranty Corp., the federal agency that is absorbing the underfunded employee pension program at Hardwick Clothes, claims the May 2 auction of Hardwick is scheduled too soon to allow other bidders to prepare offers and the reimbursement fees and requirements are too difficult for others to top the so-called "stalking horse" bid from Jones.
"These flaws in the bid procedures will substantially harm creditors because they will limit the number of prospective bidders, decrease competition at auction, and will result in a lower sales price," PBGC Chief Counsel Israel Goldowitz argues in a 16-page filing in the U.S. Bankruptcy Court in Chattanooga.
Hardwick asked the PBGC to take over its defined benefit pension plan in 2012, which the agency says is more than $4.6 million short of what it needs to pay retirement benefits. PBGC guarantees that the 644 current and former employees of Hardwick covered by the pension plan will be paid their retirement benefits, but the agency then charges premiums to the employer.
PBGC also is looking to recover more than $2.5 million from Hardwick for unpaid premiums owned to the government agency since it took over the plan.
Jones, the founder and CEO of the nation's biggest payday lending company, Check Into Cash, has offered to pay $2 million to acquire the assets of Hardwick Clothes. Jones said he wants to save Cleveland's oldest manufacturer and build back the business.
Bruce Bailey, an attorney for Hardwick, said his firm is preparing a response to the PBGC objections to the bidding process. U.S. Bankruptcy Judge Shelly Rucker will hear arguments about the proposed auction at a 10 a.m. hearing Thursday in Chattanooga.
"We hope we 're able to push ahead with the sales process," Bailey said. "We think that will be in everyone's best interests."
Contact Dave Flessner at firstname.lastname@example.org or at 757-6340.