Hardwick Clothes negotiations continue
by BRIAN GRAVES Banner Staff Writer
Apr 11, 2014 | 1808 views | 0 0 comments | 27 27 recommendations | email to a friend | print

The sale of Hardwick Clothes to Jones CapitalCorp. is now on hold and could be in jeopardy, following a ruling by a federal judge that would force the reduction of a proposed expense reimbursement fee.

At a hearing held in U.S. Bankruptcy Court in Chattanooga on Thursday, Judge Shelley D. Rucker presided over a 2 1/2-hour session which was able to solve most of the objections that had been filed by the Pension Benefit Guaranty Corporation.

PBGC’s argument with the timing of the bidding process, the ability for potential bidders to see the full list of assets that would be sold and the time frame in which bidding would be allowed were resolved by agreement between PBGC and Hardwick.

However, under the proposed bidding process, Jones CapitalCorp. would be paid $200,000 should another credible and qualified bidder bid more than Jones’ $2 million offer and win control of Hardwick.

That fee, according to PBGC, is excessive.

The judge said she would approve the submitted bidding proposal if the expense reimbursement was reduced to $100,000.

That brought things to a halt at least until Tuesday.

Attorney Courtney Hanson, representing PBGC, said there were no precedents for such a large percentage of sale cost — in this instance 10 percent — to be required.

She said history in the judicial district rarely goes above the 1 to 2 percent range.

Joe Oliver, senior vice president of Jones CapitalCorp., testified that almost $132,000 had already been spent on items such as assessments of facilities, engineering and legal fees, with an estimate of at least another $200,000 more before the process ends.

Such costs are normally added to cases such as these in order to ensure an original bidder’s cost for the work necessary to make such a bid is also incurred by other bidders.

“That does not include internal work [done by Jones employees],” Oliver said.

The sticking point came when Oliver was questioned about the inclusion of expenses for an executive search designed to find a CEO for what would be a ramped up Hardwick company under the Jones umbrella of businesses.

Besides the costs of the search, expenses for interviewing candidates are included, as well as a $100,000 “severance” cost.

Oliver contended the cost would be necessary because Jones wanted to have an experienced person in place immediately once an acquisition took place.

“If that person has to resign from a job and if Jones is not the successful bidder [that person would need compensation],” Oliver said.

He continued saying Jones CapitalCorp. “wants to be prepared.”

“We cannot wait until the process is completed. We need this person in place,” Oliver said.

He added there are three candidates scheduled to be in Cleveland next week for interviews.

“[Allan Jones] is committed to this,” Oliver said, adding he had searched for “experts in the apparel business” for the position.

Oliver said Jones wanted to have the best available to make sure the company grows and can “preserve jobs for all the employees.”

It was the subject of employees that drew emotion into the proceedings.

Sixteen Hardwick employees, some who had been there more than 30 years, were in attendance to view the session.

PBGC counsel Hanson pushed Hardwick President Tommy Hopper on why the Jones offer of $2 million was acceptable when a 2011 assessment of the company’s property was $3.7 million.

Hopper testified he had attempted to reach out to other clothing companies, but the industry had shrunk to a number where “if one of us gets sick, we all know it.”

“Our sincere interest was in keeping operations going and doing well for another 135 years,” Hopper said. “And, do what was appropriate for our employees, and that’s something we hold dear.”

Hopper almost lost his composure as his eyes teared and his voiced quivered adding, “We’ve got lots of good employees.”

Hanson continued a line of questioning as to the options Hardwick had pursued to sell its assets to pay debts.

He said selling assets “piecemeal” was no guarantee it would bring the assessment value of $3.7 million.

“Our focus is to keep going forward,” Hopper said. “That was our intent when we tried to negotiate with you (PBGC).”

“Central is the fact that 220 jobs would be eliminated,” he added. “Jones views our employees as an asset.”

“Mr. Jones’ interest [in buying Hardwick] is because he’s for Cleveland. He’s Cleveland’s biggest advocate,” Hopper said.

Both the Jones and Hardwick attorneys kept arguing the longer the process drags on, the more it will add to Hardwick’s debt, and more costs will be added to being able to complete an acquisition.

After a 20-minute meeting in the judge’s chambers, attorney Jerrold Farinash, representing Jones CapitalCorp., asked the judge to allow the sides to continue negotiations and file “either an agreement or a withdrawal” by Tuesday — an arrangement to which the judge agreed.

After the session, Hardwick employees formed a semicircle in the courtroom hallway as Allan Jones spoke to them in an impromptu session.

“I very much appreciate you coming today,” he said.

“I was ready to withdraw [the offer]. I couldn’t withdraw with all you sitting there. I need to cool down and think,” Jones said.

The employees also took the time to give hugs and signs of support to both Jones and Hopper as they exited the building.

During an earlier break in the hearing, Jones talked to some of the employees, saying he had “a thousand ideas” and was showing examples of new labels a revived Hardwick Clothes would use on its apparel.

Another hearing will be called by Rucker, if necessary, depending on the filings she receives by the Tuesday deadline.