Hartmarx sale to private-equity firm in jeopardy, buyer says
Hartmarx Corp., the bankrupt Chicago-based suitmaker, is endangering its sale to private-equity firm Emerisque Brands U.K. Ltd. by demanding payments not included in the $128.4 million deal, the buyer told a judge. The company has operations in Des Plaines.
The sale, approved in June, is jeopardized by Hartmarx's insisting that Emerisque pay $2.4 million of additional costs, including about $700,000 in lawyers' fees, Emerisque said in a filing yesterday in U.S. Bankruptcy Court in Chicago.
"The debtor's attempt to sabotage the sale in hopes of extracting additional consideration from the purchasers is unfounded and disingenuous," London-based Emerisque said in the filing. "The purchasers must know with certainty whether this sale is going forward immediately."
Emerisque yesterday asked U.S. Bankruptcy Judge Bruce W. Black in Chicago to force Hartmarx to reveal if it planned to go through with the sale by today. Black declined. The sale of most of Hartmarx's assets to Emerisque and its partner, SKNL North America BV, was approved June 25, and set to close on July 7.
The 120-year-old maker of Hickey Freeman and Hart Schaffner Marx brands sought Chapter 11 protection Jan. 23 amid a group of retail industry bankruptcies brought on by a tight credit market, rising unemployment and the recession. The sale includes the assumption of $33.5 million in debt, court papers show.
Emerisque's lawyer, Kelly Frazier of the firm Steptoe & Johnson LLP in Los Angeles, didn't immediately return a call for comment. Neither did Hartmarx's lawyer, George Panagakis of Skadden, Arps, Slate Meagher & Flom LLP in Chicago.
Emerisque Improved Offer
In its filing, Emerisque said it improved the offer after the sale was approved, by agreeing to pay additional costs including $300,000 for unpaid administrative expenses. It had already agreed to pay $2 million for such costs.
Under the sale agreement, the Hartmarx estate will retain assets valued at more than $18 million, the buyer said.
Events leading up to the sale were also contentious. Hartmarx's biggest creditor, Wells Fargo & Co., opposed an earlier offer as too low and was criticized by legislators seeking to save jobs.
Illinois Governor Patrick Quinn and lawmakers in Washington publicly urged the bank to support the deal, while the state's treasurer threatened to take away Wells Fargo's management of Illinois' $8 billion portfolio.
Wells Fargo's Wachovia unit, acquired in December, is agent for itself and other lenders in the case. The group extended more than $100 million in financing to the company since Hartmarx filed for bankruptcy.
Hartmarx listed assets of $483 million and debt of $261 million as of Oct. 9. The company said it owed $113.5 million to banks that gave it bankruptcy financing.
The case is In Re Hartmarx Corp., 09-02046, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).