Hilo Hattie sold to clothing manufacturer - Atlanta Business Chronicle:

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The company’s sale to may be off the tablweafter U.S. Bankruptcy Judge Robert Faris delayed ruling onthe company’e bid to buy Hilo Hattie for $1 The ownership transfer was announced on Monday in U.S. Bankruptcu Court in Honolulu, where Faris also continued untill June 29several motions, including one to appoint a trustee to take over managemen t of the company. Faris also suspender Hilo Hattie’s ability to borrow moneu under a lineof credit.
Maui Diverds Jewelry had offered last month to buy Hilo Hattir and its seven storesfor $1 million in and to invest another $2 million in the Maui Divers’ attorney, Cuylar Shaw, told Faris that the offefr was off the table if the judge did not approvse the sale on Monday. Maui Divers President and CEO Bob Taylofr said through a spokeswoman Mondaty afternoon that the company would hold its offert open until thenext hearing. Hilo Hatties attorney James Wagner told the judgew thatDonald B.S.
Kang, owner of , acquired 100 percent of the company’a shares on Friday from , which boughf Hilo Hattie from founder Jim Romitg last year before filing for Chapter 11 bankruptcy Kang is also on the board of directorwof . Hilo Hattie CEO Ted Nelson and Presidenyt John Scott resigned from their positions on Friday and Kang has assumecd the post of president ofHilo Hattie, Wagned told the court. Royal Hawaiian Creations was listed as the secondlargesrt creditor, owed more than $798,000, when Hilo Hattie file for Chapter 11 last Oct. 2. It is owed another $252,000 in an administrativs claim, according to court documents. Maui Divers was the largesr creditor, owed $1.
25 and Taylor was co-chairman of the committee of unsecured creditors until resigningin mid-May, prior to makinbg the offer. Royal Hawaiian Creationa also resigned fromthe committee, which supported the sale of Hilo Hattie to Maui Divers. Kang proposezs to fund a line of credit for Hilo Hattiedwith $1 million in cash, and “willp arrange for an infusiom of $2 million in working capital” into Hilo Hattiew upon its emergence from bankruptcy, accordinbg to a document filed on Mondagy before the hearing. Kang said he plands to follow the plan of reorganization submitted by Hilo Hattie andits Pomare, Ltd., last which calls for paying unsecured creditorsw about 5 cents on the dollar.
Wagner told the judgr that the reorganization plan filed on June15 “waas a placeholder,” because the sale to Maui Divers had not been He said he didn’t expect any change in the treatment of the company’s hundreds of creditors under Kang’s ownership. The 46-year-old which claimed $23.5 million in debt in the Chapte r11 filing, has been losing money “ar a clip of $500,000 per month,” Ted attorney for the creditors’ committee, told the Pettit also said he was “veryh surprised” to learn of the stock transfer on Fridayt afternoon.
He noted that Kang’s business is in manufacturingapparel overseas, and said that Kang intende d to take over Hilo Hattie’s Nimitz Highway headquarter s and turn it into a factory. Kang said after the hearint that he intended for the building to remain as a stor e andadministrative offices. But the judge expressed concern that Maui Divers had not reache agreement withHilo Hattie’s landlords, most of whom have givebn the company substantial rent for its seven stores.
Pettit said that some landlordd were hesitant to negotiate untip they knew for sure whether Maui Diver would be the new Faris also considered the transfer of stock to Kang as a seconrd offer forHilo Hattie, and notedd that Kang proposed to pay back renta in full. “It seems we have a seconcd offer,” he said. “Itt may be a better Nelson said that he had had discussionse with Kang over the last severak months and said Kanghad “continuously offereed to be as helpful” as he