US court clears S Kumars' acquisition of Hartmarx Corp
27 June 2009
Apparel firm S Kumars Nationwide Ltd has acquired the bankrupt US clothier Hartmarx Corporation at a gross enterprise value of approximately $120 million as a going concern through its wholly-owned subsidiary SKNL North America BV and Emerisque Brands UK.
Emerisque and SKNL will also assume liabilities estimated at over $33.5 million. Once the transfer of assets is complete, SKNL and Emerisque plan to revive the iconic American brands that constitute the Hartmarx portfolio.
Hartmarx, one of the last remaining American clothing manufacturers with iconic "Made in America" brands, is best known for attiring President Barack Obama for his Inauguration Day ceremony.
However, soon after on 23 January, it was forced to seek bankruptcy protection along weith 50 of its wholly-owned US subsidiaries when it filed voluntary petitions for protection under chapter 11 of the US Bankruptcy Code.
On 22 May it amnnounced havng enetered into a "stalking horse" asset purchase agreement with Emerisque and SKNL for substantially all assets for $119 million, which was objected to by its lender, the Wells Fargo-owned Wachovia Capital Finance Corp, which filed a formal objection saying the bid would leave the lenders $50 million short of full repayment.
A stalking horse agreement refers to an attempt by a debtor to maximise the value of its assets as part of or prior to a bankruptcy court-approved auction process.
The original offer of $70.5 million in cash, a junior secured note with a face value of $15.0 million, subject to adjustments for changes in the company's borrowing base and assumption of $33.5 million liabilities was raised during end of the wek negotiations to $128.4 million - of which $83.9 million (amounting 72 per cent of the balance on Hartmarx's bankruptcy loan as of 8 May), and $5.5 million of the junior subordinated secured note being paid directly to Wachovia, in exchange of support for the deal.