Williams & Williams Realty Services, LLC, filed a $2.1 million bid for Hardwick Clothes late Friday afternoon, surpassing the $1.9 million bid of Cleveland businessman Allan Jones by $200,000.
According to filings with the U.S. Bankruptcy Court, the bid was entered into the court records at 5:04 p.m. Friday along with a cash deposit of $210,000 — 10 percent of the proposed purchase price.
Deadline for a competing bid was set for 5 p.m. Friday.
The filing also included a revised asset purchase agreement between Williams and Hardwick Clothes as well as a commitment letter from The Signature Group indicating the bidder’s source of funding for the purchase price.
The agreement was signed by Williams and not by a representative of Hardwick.
That letter of funding shows Williams has secured financing with Signature Group for an amount up to $3,125,000 to complete the acquisition of Hardwick Clothes and its assets with $3 million dedicated toward the acquisition price and $125,000 as a lender fee.
Terms of the loan will be five years from date of closing.
Also included with the filing is an “exchange agreement” by Williams with the American Exchange Company of Minneapolis, MN.
In an exchange agreement, "relinquished" property is sold and "replacement" property is subsequently purchased.
A qualified third-party intermediary holds the proceeds from the sale of the relinquished property pending purchase of the replacement property.
The relinquished property in this case is described as real property located at 117 Fort Stevenson Place in Lookout Mountain. The replacement property would be that of Hardwick Clothes.
The document says Williams seeks to exchange the Lookout Mountain property for “like kind replacement properties in such way to qualify for tax-deferred treatment.”
The agreement shows First American Exchange Company would act as a “qualified intermediary” and would “facilitate the tax deferred exchange, to be substituted as the seller of relinquished property, to hold the sale proceeds from relinquished property, and to utilize the sale proceeds in acquiring and transferring to [Williams] like kind replacement property to complete the tax-deferred exchange.”
The Lookout Mountain location is listed with Williams & Williams Reality as a three-acre lot for $700,000 and is described as “last of the large brow lots on Lookout Mountain. All utilities available. Wooded lot with caves and a stable neighborhood.”
The assignment document signed by Williams states $210,000 of the $449,254 proceeds under the agreement with American Exchange would be assigned to Hardwick with those funds being non-refundable.
This means Williams is allowing First American to become the seller of the Lookout Mountain property.
First American would hold the proceeds from the sale of the property and use those proceeds to aid Williams in acquiring the Hardwick assets in a way that takes advantage of federal regulations allowing deferral of taxes on such transactions.
Because of the competing bid, the prior court order dictates an auction will be held at 9 a.m. Monday morning at the law offices of Chambliss, Bahner & Stophel, PC, 605 Chestnut St., Suite in Chattanooga.
There are now three scenarios possible.
First, Jones could withdraw his bid to acquire Hardwick and allow Williams’ bid to prevail.
Second, Jones could outbid Williams during the auction; however, Williams’ documentation shows he has a $3 million line of credit he can use toward the purchase.
It is unsure Williams would go higher than his $2.1 million or how high Jones would be willing to go in an attempt to outbid Williams.
Third, there is still the ability for an objection to any sale to be made to the court.
Objections must be filed by Thursday, June 5 at 4 p.m. — the day prior to a scheduled court hearing to finalize a sale.
That sale hearing will be held Friday, June 6 at 9 a.m. at the U.S. Bankruptcy Court in Chattanooga.
Nothing in the prior court orders describing the process for the Hardwick sale specifically shows anything that, without a judge’s order or unknown circumstances, would extend the time frame for the Hardwick sale.