A reimbursement issue has put a snag in plans by Cleveland businessman Allan Jones to buy the financially-ailing Hardwick Clothes.
Current management of the 135-year-old plant at Cleveland, Tn., had agreed to the $2 million offer by Mr. Jones. However, the Pension Benefit Guaranty Corporation filed an objection, and Bankruptcy Judge Shelley Rucker held a lengthy hearing on Thursday morning.
Other issues were worked out, including allowing another month for another bidder to come forward. However, Jones Capital requested $200,000 in reimbursement for its due diligence expenses should another bidder come along with a higher offer.
Judge Rucker agreed to allow $100,000, but said she would not include expenses by the Jones group for an executive search to head the mill.
Attorneys asked for a delay until next Tuesday at 10 a.m. for further discussions. Attorney Jerry Farinash, representing the Jones group, also said he would ask Judge Rucker to reconsider.
An international executive search firm hired by Jones Capital has already come up with three clothing executive finalists, who are due to come to Cleveland next week for interviews.
Thomas Hardwick Hopper, the fifth generation of the Hardwick family to manage the mill, said he and the other two board members, marketing specialist Nancy Deakins and retired Cleveland attorney Charles Corn, had approved the Jones deal.
Mr. Hopper said of Allan Jones, "He's from Cleveland. He has a lot of history here. He is Cleveland's biggest supporter. He has an interest in all things Cleveland."
Mr. Jones, founder of the Check into Cash chain, was at the hearing, but he did not testify.
Mr. Hopper said the company has 220 employees, some of whom were with the firm when it left an old downtown plant to move to a new facility in 1974.
Asked about the workers, he became emotional and paused, finally saying there were "a lot of good people."
Victoria Hardwick, a cousin, also filed an objection, but she did not show up or have a representative. Mr. Hopper said she had earlier asked for company documents and been given them. The company has not paid dividends since 2006. Victoria Hopper has about 1,000 shares of stock.
Mr. Hopper said at one time his cousin "sent a colorful letter to Chambliss Bahner."
Mr. Hopper said a 2011 appraisal of the real estate value of the 40 acres and plant was $3.7 million. He said he did not know the value today.
He said there are few plants left who sew tailored men's clothes. He said he checked with executives of those few firms and they are not interested in purchasing the plant.
Mr. Hopper said if the firm had to liquidate its assets it would likely get little return for its inventory and specialty equipment.
He said it was accountant Tom Decosimo who suggested that Allan Jones might be a possible buyer.
Mr. Hopper said the firm has drawn down $536,000 on a $2 million line of credit and may be up to $700,000 by the time others get a chance to make offers.
Joe Albert Mason, a Jones Capital official, said $132,500 had been spent thus far in checking out the plant, including $76,000 for the search firm, with $46,500 more owed. He said the Jones group might have to wind up paying some $100,000 in severance for the new executive, if he or she accepted the offer and left his or her current firm and then the Jones group did not get the bid.
Mr. Mason said the building needs repairs, including a new roof. "I have seen several buckets collecting rainwater," he said.
He said Mr. Jones envisions "getting the business back to what it was 10-15 years ago with triple the revenues and with retaining the jobs."
The deal requires all the current employees to reapply, but Mr. Mason said it is expected that most would be retained.
He said the Jones group wants to keep the plant going with little or no period of a shutdown.
Attorney Farinash said the Jones group has some $68,000 in legal fees thus far. Bruce Bailey, representing Hardwick Clothes, has filed for $109,463.54 plus $1,664.54 in expenses and Tom Decosimo for $17,387.50 and $39.55 expenses.