According to the government, the sale of the nation’s oldest privately owned clothing maker, now bankrupt, may be happening too quickly and may not be in the best interests of the bankrupt company’s creditors. The clothing company has been making tailored suits and clothing in Cleveland, Tennessee since 1880. The privately owned company is currently operating under bankruptcy court supervision. The company hopes to emerge from bankruptcy after a proposed $2 million sale to a local Cleveland millionaire who says he wants to rebuild the business and save Cleveland’s oldest company.
According to U.S. Pension Benefit Guaranty Corp. (PBGC), which is the federal agency absorbing the bankrupt company’s pension program, the upcoming auction has been scheduled too quickly to allow other bidders time to prepare offers. The federal agency also points to flaws in the bidding process which it argues will reduce the number of bids and competition which will lower the purchase price and harm creditors.
PBGC was asked by the now bankrupt company in 2012 to take over the pension plan; PBGC states that the company is short more than $4.6 million in retirement benefits. Current and former employees totaling 644 will receive benefits, but PBGC charges premiums to the employer. PBGC says it also plans to pursue $2.5 million in premiums the company has failed to pay since PBGC took over the pension plan. The owners of the company blame PBGC for pushing the company into bankruptcy.
Primarily, there are two types of business bankruptcy. When a company enters into a business or commercial bankruptcy under Chapter 11, the company is entering a business reorganization process. This reorganization process begins an effort to restore the company to profitability wherein the management continues to run the daily business of the company, but all major decisions must be approved by the bankruptcy court. Alternately, a Chapter 7 liquidation bankruptcy allows a struggling business to liquidate assets to repay creditors.
Different business bankruptcy options are available for different situations and offer different solutions for struggling companies. Either liquidation of debts or business reorganization bankruptcy may offer help to a struggling business. It is important to understand the different bankruptcy options to determine which option best meets the needs, goals and circumstances of the company.
Source: Timesfreepress.com, “Pension agency balks at sale of Hardwick Clothes in Cleveland, TN,” Dave Flessner, April 9, 2014
