No trustee yet for Hilo Hattie


POSTED: Tuesday, May 12, 2009

A U.S. Bankruptcy Court judge deferred yesterday his decision on whether to appoint a trustee for Hilo Hattie until June 22 to coincide with a liquidation hearing.

Judge Robert Faris' reasoning was that the options on the table would remain the same.

Even with the appointment of a trustee, he said, Hilo Hattie's only two courses of action would be a quick sale or a liquidation. About 200 jobs at Hilo Hattie are at stake if the company is liquidated.

James Wagner, attorney for Pomare Ltd., doing business as Hilo Hattie, opposed appointment of a trustee, saying that would only complicate the matter more.

Several creditors, meanwhile, still might put an offer on the table, he said.

But Ted Pettit, counsel for the official committee of unsecured creditors, said a trustee would be in its best interest because of Hilo Hattie's reckless management of its finances.

Since filing for bankruptcy, Hilo Hattie owes $1.5 million, he said, an amount expected to double to $3 million by June.

But Wagner said merchandise was still coming into the store and that landlords, including the Weinberg Foundation as well as General Growth Properties, are allowing the retailer to “;abate rent”; while footing only common area maintenance fees.

Hilo Hattie, which has seven stores in Hawaii, also has signed letters of intent for up to six more stores in Hawaii, he said.

The 45-year-old iconic retailer of aloha shirts and Hawaiian souvenirs had three potential suitors, including Castle & Cooke, Kona Mountain Coffee and an individual, Wagner said.

But Bill Dwyer, president of Kona Mountain, said he changed his mind after the company failed to provide adequate and timely financial information.

Kona Mountain has supplied Hilo Hattie with coffee products for 18 years, said Dwyer, and is owed more than $4,000. Dwyer said the company was ready to offer $2 million in capital but never got information about the company's debts.

TOC Inc., a California company led by Ted Nelson, who also owns Fantastic Sams hair salons in Hawaii, acquired Hilo Hattie in May 2008 for an undisclosed price.

U.S. trustee Curtis Ching filed the motion for Chapter 7 liquidation in April, citing the company's deteriorating financial condition. Under TOC Inc., Hilo Hattie has lost about $7.5 million since last October and has not been paying its post-petition obligations.

Pettit said TOC Inc. has not invested a penny in the company in the last year.

“;Is anyone willing to step up and rebuild vendor trust?”; Pettit said outside of the courtroom. “;Show us, where's the money?”;

Nelson declined to comment upon leaving the courtroom yesterday.

Hilo Hattie, due to lack of financing, was unable to follow through with its plans to open a flagship store at the Royal Hawaiian Center earlier this year. It faces a mechanic's lien, meanwhile, from Brett Hill Construction for more than $212,000 of unpaid post-petition renovation work at the center.