Hardwick Clothes cleared “a major hurdle” in its financial reorganization process Tuesday when a federal bankruptcy judge approved a plan that allows the company to have Burlington Worldwide labeled as a “critical vendor.”
“Critical vendor” status provides the company filing for reorganization the ability to continue business with another company whose goods and services are necessary for business operations during the reorganization process.
That allows Hardwick to proceed with a six-month payment arrangement negotiated with Burlington on a $352,000 debt the Cleveland company owed prior to its filing for bankruptcy protection.
During those six months, Hardwick will continue to receive goods from Burlington on a cash up-front basis for the first two months.
Months three and four will allow 30-day credit terms and months five and six will give Hardwick the ability to buy materials from Burlington on 60-day credit terms.
There were no objections filed by any debtors either in person, by document or telephonically during the brief hearing presided over by U.S. Bankruptcy Judge Shelley D. Rucker.
Rucker allowed both Hardwick Clothes President Tommy Hopper and a representative from Burlington to forgo testimony because of the lack of objections.
Instead, attorney Jeffrey Maddux, representing Hardwick, reviewed the specifics of the agreement and the importance of continuing the flow of materials from Burlington to the company.
Maddux emphasized to the court the important relationship between the two companies, noting a daily contact between the entities for more than 50 years.
“They have been constantly developing their techniques through this time,” Maddux said. “[Burlington] provides services that are critical, unique and specific to Hardwick.”
He said Burlington would not continue to be a vendor if the “critical vendor” designation were disallowed.
“If Burlington were to stop doing business with the company, [Hardwick’s] inventory would essentially be worthless,” Maddux said. “It would cost jobs and a potential shutdown of a portion of the business. Other creditors would be affected, as would customers. There is no alternative.”
The court had to consider three issues in order to allow the designation to proceed.
Questions about if the order would allow the business to continue, whether it made “sound business judgement” and if it would aid in the reorganization process were all answered in the affirmative to the approval of the court.
Rucker said all three qualifications had been met and the order would “hopefully ensure the success of reorganization.”
After the hearing, Hopper said the ruling was an important step in the company’s continued operations.
“We have always tried to use a good business plan,” Hopper said. “Of course, having to be in court was not part of the plan.”
Hardwick chose using reorganization protection when the Pension Benefit Guaranty Corporation informed the company it expected a payment of $4.6 million within days of its notice to the company to cover liabilities related to the company’s termination of its pension plan.
He said Burlington was essentially the first on board with support once the filing had been made.
“They were the ones who first said ‘We want to be a critical vendor,’” Hopper said. “I didn’t even know what that meant at the time.”
He said Hardwick is continuing to see good sales numbers and will continue an upward, optimistic attitude as it continues through the legal processes.
“This is a very competitive business,” Hopper said. “But, I believe we have a history with the professional manner in which we treat our employees, our customers and our vendors. We could not be any [more] appreciative of the support we have seen from all of those as well as from the community.”