Jones CapitalCorp. has reacted to the objection filed by the Pension Benefit Guaranty Corporation to the proposed procedures that would lead to Jones’ acquisition of Hardwick Clothes.
Lynn DeVault of Jones CapitalCorp said in a statement to the Cleveland Daily Banner the move by PBGC was “not unexpected.”
“We do not feel that their request to extend the company’s time in bankruptcy benefits the stakeholders, especially the trade creditors who lose ground with every draw on the debtor in possession financing,” DeVault said.
“We feel our offer and commitment of ongoing financial support will ensure the company’s survival and save the jobs that are so important to Cleveland and Bradley County.”
PBGC said it objected to the plan filed in U.S. Bankruptcy Court on March 19 — the same day the acquisition plan was announced — because it did not allow time for adequate marketing of Hardwick’s assets.
It also contends the items in the agreement which call for a successful competitive bidder to pay at least $100,000 more than the $2 million buying price proposed by Jones and an added $200,000 expense reimbursement fee are “excessive.”
PBGC’s concerns stem from seeking to recoup the $4 million the organization says Hardwick owes it after the clothing company discontinued its pension program and found continuing to make payments to the PBGC economically untenable while trying to maintain the business.
Hardwick filed for bankruptcy in December after what the company said were unsuccessful attempts at negotiating a settlement with PBGC.
Hardwick said it received the demand for the $4 million payment from PBGC during those negotiations unexpectedly.
PBGC gave Hardwick a matter of days to pay, which caused Hardwick to file for bankruptcy protection.
Hardwick was later able to obtain a $2 million “debtor in possession” financing agreement with Keltic Financial Partners LLC allowing the company to have a cash flow in order to deal with debtors who would not or could not deal with the company while in the bankruptcy process.
That is what DeVault referred to in her statement suggesting the longer the process is delayed, the more Hardwick has to draw from that fund, which would worsen the debt situation.
Hardwick also cleared a major legal hurdle when the court allowed Burlington Worldwide to be named a “critical vendor” allowing the company to continue a scheduled, limited credit relationship with the fabric company Hardwick said was essential to maintaining business operations.
PBGC’s filing is the only major objection that has been filed since Hardwick began its bankruptcy process.
The hearing in U.S. Bankruptcy Court is scheduled for 10 a.m. Thursday in Chattanooga.