There was no Hilo Hattie sales deal for Maui Divers Jewelry yesterday in U.S. Bankruptcy Court.

    Hilo Hattie Sold to Royal Hawaiian Creations

 

 

A new owner is proposing to pump money into the 46-year-old company in an attempt to save it from liquidation.

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Judge Robert Faris deferred his decision another week in light of the latest development — that 100 percent of Hilo Hattie's stock had been transferred to the owner of Royal Hawaiian Creations.

Despite objections by attorneys for the committee of unsecured creditors, Faris said he would weigh the possibility of a second legitimate bidder and a potentially better offer for the company.

He said it was unfortunate that the Royal Hawaiian offer came in so late.

His decisions on numerous motions, including whether to approve the Maui Divers sale, appoint a trustee or liquidate the business, have been delayed until Monday.

TOC Inc., the owner of Pomare Ltd. dba Hilo Hattie, made a deal Friday to sell the company to one of his creditors, Donald “;Bum Sik”; Kang, owner of apparel wholesaler Royal Hawaiian Creations. The deal was announced yesterday.

Company Chief Executive Ted Nelson and President John Scott resigned from their positions. Kang is the new president of the company.

Craig Bingham will remain as chief financial officer, while Mark Storfer will be chief operating officer.

Attorneys for Pomare will file a new reorganization plan and disclosure statement reflecting these changes before Monday.

There no longer will be an aggressive growth plan which was contingent on $7 million in exit financing, according to Pomare attorney Chuck Choi. Kang instead has committed to paying off creditors, including the deferred rent for Hilo Hattie's seven leases.

Pomare in its disclosure statement last week said it owes more than $3 million in accrued administrative claims, including $1.6 million in deferred rent.

The plan still will offer to pay unsecured creditors 5 percent of what they are owed over the next five years.

A group of about 500 smaller creditors in a “;convenience class”; are being offered 20 percent of claims up to $1,000.

In a separate filing yesterday, Hilo Hattie disclosed in its monthly operating report that it had a net loss of $665,227 in May to run its total losses to $6.1 million since filing for bankruptcy last October.

Royal Hawaiian Creations, which is owed more than $798,000, is a Honolulu-based wholesaler and manufacturer offering aloha apparel and accessories.

It has done business in Hawaii since 1987 and has about 25 employees, according to Kang. He had a retail store in Waikiki — called Royal Creations — for more than 15 years, but closed it last year to focus on wholesale operations.

Kang said he could offer $1 million in immediate cash plus another $2 million obtained through financing to bring the business out of debt.

Faris said he was hesitant to approve the Maui Divers sale, given that the company is still negotiating a few leases for Hilo Hattie's seven stores.

Maui Divers Jewelry came forward in May and offered $1 million to buy Hilo Hattie, plus $2 million in capital. A few landlords have declined to negotiate leases with Maui Divers until it assumes the leases.

Although Maui Divers had said the deal would expire if it wasn't approved yesterday, attorney Cuyler Shaw said: “;We're leaving the door open.”;

Nelson, a California investor who acquired Hilo Hattie in May 2008, said he was pleased with the judge's decision.

“;Ultimately, I want to do what's best for the company,”; he said after yesterday's hearing. “;It became clear that the perfect solution would be to hand the keys to Mr. Kang. He is just the right person to take Hilo Hattie to the next level.”;

Besides having the financial wherewithal, Nelson called Kang “;honorable,”; a business veteran with more than 30 years of experience and the necessary contacts.

Kang says he saw the deal as an opportunity to save the iconic 46-year-old business as well as its 200 employees.

He had been in discussions with Nelson for at least a month, he said, and felt the stock transfer was a less adversarial way to acquire the company.

He plans to keep Hilo Hattie's Nimitz headquarters, he said, while opening a few smaller stores in Waikiki. He also said he would improve efficiencies and reinstate vendor relationships.