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Maui Divers offer to buy Hilo Hattie ends Monday


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POSTED: Thursday, June 18, 2009

Bob Taylor, chief executive of Maui Divers Jewelry, is still holding out on his $1 million bid to purchase Hilo Hattie out of bankruptcy, calling it a more viable plan than the company's reorganization plan.

“;It's more than anybody else has agreed to put in,”; Taylor told the Star-Bulletin. “;We have the money now. We can write a check today.”;

Taylor put forth his offer last month, with the approval of the official committee of unsecured creditors, committing $1 million to buy Hilo Hattie's assets, plus $2 million of working capital.

The fate of Hilo Hattie will be determined on Monday, when U.S. Bankruptcy Court Judge Robert J. Faris is expected to decide on the sale.

Faris on Monday is also scheduled to decide whether to appoint a trustee for the bankrupt company or convert the case to Chapter 7 liquidation.

Taylor said his offer to buy Hilo Hattie will expire on Monday.

Pomare Ltd. dba Hilo Hattie, meanwhile, filed its reorganization plan on Monday, claiming it will wipe away about $15 million in debts by paying its unsecured creditors about 5 percent of what they are owed over five years, without interest.

The 5 percent, Pomare says, is substantially more than the creditors would receive — basically nothing — if the case were converted to liquidation.

Pomare also says due to agreements negotiated with landlords, it will continue deferring rent for its Nimitz headquarters and seven retail stores. It says that by the holiday season, the company will be able to come up with $7 million in exit financing, but does not specify how.

Pomare requested a July 13 court hearing on its plan, which it says will keep its stores open, along with 200 people employed under the current management team and helm of CEO Ted Nelson.

Also, Pomare says sales will stabilize and increase in fiscal year 2010.

Pomare projects sales will increase between September 2010 and 2014 from $35.3 million to $69.5 million, taking seven new stores into account. In 2012, Pomare says, it expects to generate more than $51 million in revenue.

But Taylor questioned where Pomare plans to get $7 million in exit financing.

“;Where is the money?”; said Taylor. “;They don't have that money now, so there's no sense in contemplating what they say they're going to do with it.”;

Taylor said the survival of Hilo Hattie is at stake.

“;If something isn't done quickly, the post-petition debts will continue to increase,”; he said. “;They're delinquent in taxes, they're running substantial losses.”;

Attorneys for Hilo Hattie, meanwhile, say the Maui Divers offer falls short of the $3.5 million necessary to pay accrued administrative and secured claims.

Since filing for bankruptcy in October, Hilo Hattie has recorded $5.4 million in losses, and for the month-long period ended May 2, the company lost $317,206.

Among the dozens of creditors, Hilo Hattie is owed $1.25 million, while Tori Richard, Iolani Sportswear and DBI Hawaii Ltd. combined are owed about $111,634.

Maui Divers has its own business at stake — concessions within Hilo Hattie stores represent about 20 percent of the jeweler's business.

Taylor said that if successful with his bid, he won't be pursuing the 30,000-square-foot Royal Hawaiian lease the company lost, nor the seven additional stores.

“;Our focus will be to get into the existing operations and turning them around,”; said Taylor.

WHAT HAPPENED?

Timeline of Hilo Hattie since bankruptcy:

» Oct. 2, 2008: Hilo Hattie files for Chapter 11 bankruptcy

» Oct. 9, 2008: U.S. trustees appoint a nine-member committee — Maui Divers, Royal Hawaiian Creations, Paul deVille, Kenneth Uemura, Island Import Co. Inc., Hagadone Hawaii Inc. Trade West Inc., The Madden Corp. and Lena Young. (Madden, RHC and Maui Divers have since resigned from the committee).

» Feb. 1: Hilo Hattie fails to obtain financing commitments to complete buildout of Royal Hawaiian Center flagship store by this date. Lease rejected.

» April 13: Committee of unsecured creditors files motion for appointment of a trustee (hearing delayed from May 11 to June 22).

» April 24: U.S. trustees file motion to convert Chapter 11 to Chapter 7 liquidation or to dismiss the case.

» May 19: Maui Divers offers to buy Hilo Hattie plus leases for seven stores for $1 million. Committee filed motion for sale of Hilo Hattie to Maui Divers for $1 million.

» June 15: Motion filed to approve disclosure statement for the plan of reorganization for Pomare Ltd.

» June 22: Scheduled hearing on committee's motion to appoint a trustee/approve sale to Maui Divers Jewelry.

» July 13: Requested date for hearing on Pomare's reorganization plan.