Lenders oppose S Kumar's joint bid for Hartmarx

Chicago, May 31 (PTI) Indian apparel maker S Kumars
Nationwide Ltd's joint bid to snap up American suit designer
Hartmarx Corp, whose clientele includes US President Barack
Obama, has hit a road block with a group of lenders opposing
the proposed deal.

S Kumar's along with London-based private equity player
Emerisque has offered to buy the bankrupt Hartmarx and the
deal is worth USD 119 million.

The banks' group led by financial services major Wells
Fargo has come out against the deal saying that the deal does
not provide "adequate value" to the suit maker's lenders.

The group of lenders opposed the offer because it "fails
to provide adequate value to Hartmarx's lenders -– who have
funded Hartmarx throughout its bankruptcy including, most
recently, up to USD 20 million in additional advances," Wells
Fargo said in a statement late Friday.

On January 23, Hartmarx and its 50 wholly-owned US
subsidiaries filed voluntary petitions for protection under
chapter 11 of the United States Bankruptcy Code.

The Bankruptcy Court is to hear the offer for Hartmarx on
Monday.

The statement said the offer does not even ensure that
Emerisque would continue running Hartmarx's business
operations after the acquisition.

Hartmarx tailored the tuxedo, topcoat and suit that Obama
wore on his inauguration on January 20.

The statement noted that the offer requires selling
significant pieces of Hartmarx soon after the acquisition,
risking Hallmark jobs at several US factories and distribution
centres.

The American suit maker on May 22 said it has entered
into a "stalking horse" asset purchase agreement with
Emerisque Brands UK Limited and SKNL North America, an arm of
S Kumars Nationwide for all the assets of Hartmarx.

A stalking horse bid is an attempt by a debtor to
maximise the value of its assets as part of or before a
bankruptcy court-approved auction process.

Responding to Wells Fargo's statement, Emerisque has said
it "vehemently object(s) to the blatant distortion of the
facts that is occurring so late in the process in an attempt
to impact the outcome on Monday".

"The only factual component of the Wells Fargo statement
today is that they believe they should realize a higher cash
return on their claim. There is a significant gap between
their expectations and the reality of where asset valuations
are in the current market," Emerisque said in a separate
statement on Friday.

Emerisque noted that as the only bidder prepared to
operate Hartmarx as a going concern, our commitment to
preserving good union jobs and 'Made in America' is well
documented and unwavering.

As per the agreement terms, subject to court approval,
the buyer would acquire substantially all of the assets for
USD 70.5 million in cash and a junior secured note with a face
value of USD 15 million. Also, it has agreed to assume certain
liabilities of Hartmarx estimated to be about USD 33.5
million.


Further, Wells Fargo pointed out that Emerisque is
unwilling to assume Hartmarx's obligations to its employees,
including health care benefits, retirement and workers'
compensation, or union contract obligations.

Noting that the cash portion of the offer has been stated
to be USD 70.5 million, the statement said that this amount,
however, is subject to a working capital adjustment that,
based on Hartmarx’s projections, likely will reduce the cash
consideration to less than USD 56 million.

"This payment would be less than half the total debt
Hartmarx owes its lenders," it added. PTI RAM