A federal bankruptcy judge is scheduled to hear arguments in Chattanooga to allow a plan by which Hardwick would be able to restore a line of credit with its major supplier.
According to the filed motion, Burlington Worldwide represents 62 percent of the materials purchased by Hardwick for its production and is the largest single supplier of the piece good materials critical to Hardwick’s operations.
Burlington had extended 60-day credit terms to Hardwick prior to the clothier filling for bankruptcy on Dec. 2.
Hardwick filed for the relief after the Pension Benefit Guaranty Corporation threatened the company with a lien unless $4.6 million was immediately paid because of costs PBGC says was associated with Hardwick’s suspension of its pension plan.
Hardwick won the ability to get a $2 million line of credit in January in order to allow it to liquid capital to deal with creditors who would no longer extend credit to the company.
The arrangement allowed Hardwick to enter into an agreement with Keltic Financial Partners II, LLC allowing Keltic to become the “debtor in possession” while providing the line of credit.
This latest chapter would allow Hardwick to pay Burlington, a “critical vendor” as referred to in the court filing, bills incurred prior to the bankruptcy filing totalling approximately $353,000.
Upon payment, Burlington would continue to do business with Hardwick allowing orders on credit terms for $250,000 of “necessary material for the regular course of business resumption of its manufacturing operations.”
It is because of the uniqueness of the Burlington product Hardwick is saying it would be “extremely cost prohibitive” to attempt to replace the materials Burlington provides with those from another company.
“Hardwick Clothes’ tailoring requires, in part, shade continuity from Burlington that has been established over the course of many years,” the court filing states. “Burlington’s dyeing techniques specific to Hardwick Clothes are unmatched in the industry.”
Replacing Burlington would “create a high degree of obsolescence within Hardwick’s inventory due to lack of shade continuity.”
Hardwick says such reasoning is proven by the cases of other clothing manufacturers where critical vendor status has also been necessarily approved.
If the agreement is greenlighted by the court, Hardwick would pay Burlington $58,794 per month for a period of six months to satisfy pre-bankruptcy bills.
During that period, Hardwick will pay for new shipments of goods during the first two months on a cash up-front basis.
Months three and four will allow purchases on 30-day credit terms and months five and six will extend to 60-day credit terms.
The “process,” as Hardwick President Tommy Hopper has called it, does not appear to have slowed the company down.
Hopper told the Banner in January sales remain good, and the company has been looking for employees to add to its workforce.
The case will be heard in Courtroom A of U.S. Federal Bankruptcy Court in Chattanooga at 9:30 a.m. Tuesday.