With the announcement of the agreement on Wednesday, legal documents began quickly making their way through U.S. Bankruptcy Court.
They are all pointing to a tightening of the legal knots around the already agreed-to sale between Jones and Hardwick.
According to an order signed Thursday by U.S. Bankruptcy Judge Shelley D. Rucker, a hearing will be held on March 31 to determine the request of Hardwick to shorten the time objectors have of extending an “exclusivity period” to notify the court from 21 days down to 12 days.
The “exclusivity period” refers to the exclusive right of a debtor filing Chapter 11 reorganization for 120 days after the bankruptcy petition has been filed.
Only the debtor may file a plan of reorganization during the first 120-day period after the petition is filed (or after entry of the order for relief, if an involuntary petition was filed).
The court may grant extension of this exclusive period for up to 18 months after the petition date.
In addition, the debtor has 180 days after the petition date or entry of the order for relief to obtain acceptances of its plan.
The court may extend (up to 20 months) or reduce this acceptance exclusive period for cause.
In practice, debtors typically seek extensions of both the plan filing and plan acceptance deadlines at the same time so that any order sought from the court allows the debtor two months to seek acceptances after filing a plan before any competing plan can be filed.
During this period, parties who wish to file competing plans, with the potential of taking over the business, must convince the court to terminate the debtor’s exclusivity period.
If the exclusive period expires before the debtor has filed and obtained acceptance of a plan, other parties of interest in a case, such as the creditors’ committee or a creditor, may file a plan. Such a plan may compete with a plan filed by another party in interest or by the debtor.
Hardwick’s original expiration date is April 1.
In layman’s terms, another party who might want to show the court it can better manage the company if it took control would have to convince the court the offer is so good, the debtor company’s protection by the period should be lifted. Otherwise, the company in pursuit would have to wait until the original expiration of the exclusivity.
Hardwick is asking the exclusivity period for filing a plan be extended until June 30 and its ability to solicit acceptances of the plan to a period not more than 60 days after June 30.
The court’s order Thursday shortened the time by nine days anyone could object to the extension which will have a ruling at the March 31 hearing.
A positive ruling from the judge on March 31 would essentially be a quasi-legal block for any one other than a very serious potential buyer to get into the mix for Hardwick.
Documents are also revealing more details about the sale.
Jones CapitalCorp will pay $2 million in cash at the time the deal is closed.
Hardwick, in its filings, notes two of the largest clothing manufacturers in the United States, JoS A. Banks Clothiers and Men’s Wearhouse, have recently entered negotiations with each other for merger or acquisition “and are unlikely to have interest in Hardwick at this time.”
“This small group of manufacturers, the most likely interested purchasers, all are well aware of Hardwick’s current bankruptcy, and no one has expressed any interest to date in acquiring the assets of Hardwick except [Jones],” the documents read.
Closing of the sale would be no later than May 12, unless both parties agree otherwise.
All of that is subject to the April 10 hearing which will authorize the sale as well as establish bidding procedures.
Those proposed rules would require other interested parties to have their bids submitted by May 1 at 1 p.m.
Should there be another qualified bid, Jones CapitalCorp and the other parties would meet in a Chattanooga attorney’s office at 9 a.m. May 2 for an auction.
That is the same day the court, if their are no qualifying bids to match or exceed the Jones bid, at 1:30 p.m., could officially hand the iconic Cleveland business to a new owner for the first time in more than a century.