Hilo Hattie, the Hawaii retailer popular for its aloha shirts and souvenirs, might not be liquidated if Maui Divers Jewelry is successful in its bid to buy the bankrupt company.

Maui Divers, the state's largest jewelry manufacturer and retailer, offered Monday to buy Hilo Hattie for $1 million. Under the terms of the deal, Maui Divers would rehire all or most of Hilo Hattie's employees and local vendors and put at least $2 million into store operations and merchandising.

“;The Hilo Hattie brand is an important one to Hawaii,”; said Maui Divers President and Chief Executive Bob Taylor. “;We understand the market and Hawaii brands and are in a good position to rebuild the company.”;

The offer, contingent upon satisfactory lease negotiations at all seven Hawaii Hilo Hattie locations, must be approved by the U.S. Bankruptcy Court. If other buyers offer higher bids, an auction could ensue. However, the sale has been sanctioned by the official committee of unsecured creditors, which filed for court approval yesterday.

“;A sale of the assets is in the best interest of the bankruptcy estate because this case is in imminent danger of being dismissed or being converted to Chapter 7,”; the committee's motion said. About 200 jobs at Hilo Hattie are at stake if the company is liquidated.

A hearing date on the proposed sale still needs to be scheduled; however, a liquidation hearing is slated for June 22. The court could entertain the offer, which is recommended to close June 22 or sooner.

Taylor said the deal is a natural development based on the synergy between the two companies, but an attorney for Hilo Hattie, which was founded in 1963, termed the offer lacking.

“;The offer for $1 million is far short of the amount necessary to pay accrued post-petition rents and other payables,”; said Chuck Choi, attorney for Pomare Ltd., doing business as Hilo Hattie.

The committee of unsecured creditors is “;the one trying to sell the company,”; Choi said.

“;We told the judge that we are working on a reorganization plan,”; he said.

James Wagner, another attorney representing Hilo Hattie, also told the court earlier this month that there were other potential suitors, including Castle & Cooke, Kona Mountain Coffee and a private individual.

According to court documents, Hilo Hattie has had continued losses of about $7.5 million since it filed for Chapter 11 bankruptcy protection Oct. 2.

Maui Divers, which has been Hilo Hattie's jewelry concessionaire since 2001, is one of the company's creditors.

“;I would say that our offer does not have Hilo Hattie's support,”; Taylor said. “;I would hope that it wouldn't hurt our longtime relationship.”;

To date, the bleeding company has not submitted a reorganization plan. Hilo Hattie lost the centerpiece of its initial plan to bring the company out of bankruptcy when it was unable to meet financing requirements to build a new flagship store at the Royal Hawaiian Center in Waikiki, the committee's motion said.

As a result in April, U.S. Trustee Curtis Ching sought to dismiss the case or convert the company's Chapter 11 reorganization into Chapter 7 liquidation. However, such a move “;is not in the best interest of creditors or the estate,”; the committee's motion said.

Maui Divers, which was founded in 1959 and has more than 500 employees in about 60 locations, has a shared history with Hilo Hattie, Taylor said.

Both are small local manufacturing and retail operations that have grown into internationally recognized brands, he said.

If the sale goes through, Taylor said Maui Divers would preserve the Hilo Hattie brand and expand the company.

“;They have been operating in bankruptcy mode for some time and have had to really trim their sales force,”; Taylor said. “;We wouldn't be downsizing the company; if anything, we would be adding employees. We are a strong selling organization, and we believe in quality service.”;