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POSTED: Tuesday, June 30, 2009

There was still no Hilo Hattie sales deal yesterday in U.S. Bankruptcy Court.

Judge Robert Faris moved his decisions on numerous motions for the Hilo Hattie case to July 15.

The delay gives two contenders — Maui Divers Jewelry and Royal Hawaiian Creations — more time to present their cases before the judge as the best plan for Hilo Hattie.

Maui Divers Jewelry, a longtime concessionaire inside Hilo Hattie stores, is still interested in buying the company's assets for $1 million plus $2 million in working capital while keeping all 200 employees. Its bid is supported by the committee of unsecured creditors.

Although Maui Divers initially said the deal expired June 22, it was still willing to negotiate as of yesterday. But if Hilo Hattie's reorganization plan is approved, Maui Divers might no longer be a concessionaire inside Hilo Hattie's stores.

Attorneys for Pomare Ltd., dba Hilo Hattie, say they would like to move forward with their amended reorganization plan filed Friday following the transfer of stock to Royal Hawaiian Creations. They say Maui Divers' offer is not enough to satisfy about $3.5 million in accrued administrative and secured claims.

Royal Hawaiian Creations, a wholesaler and manufacturer of aloha apparel, is offering to inject $1 million in immediate cash, with $500,000 of that going toward the badly needed replenishment of inventory at Hilo Hattie.

Donald “;Bum Sik”; Kang, the new president and chief executive officer of Hilo Hattie, has a letter from First Hawaiian Bank committing an additional $2 million for the acquisition of the company, in addition to the $1 million already provided.

As part of the newly amended plan, Pomare now says it will pay back unsecured creditors 5 percent of what they are owed in equal annual installments — at 1 percent every year through five years.

Instead of an aggressive growth strategy, Pomare now plans to open only one or two new stores in Waikiki and might cut overhead with further staff reductions.

Royal Hawaiian Creations recorded more than $6 million in gross sales last year, and has its own manufacturing facility in Indonesia. But in the new plan, Royal Hawaiian also would move its manufacturing operations into the Nimitz headquarters and pay rent.

Both Maui Divers and Royal Hawaiian Creations were assigned to a nine-member committee of unsecured creditors last October, when Hilo Hattie filed for Chapter 11 bankruptcy. Both subsequently resigned in order to make a move.

Royal Hawaiian Creations had one meeting with Maui Divers, asking it to step aside. Maui Divers declined to do so. But Faris did not seem swayed by one plan or the other, saying that both proposals had significant uncertainties.

Faris said the transfer of stock from TOC Inc. to Kang of Royal Hawaiian Creations did not require court approval, but that a transfer of leases for Hilo Hattie's existing stores would.

Maui Divers has not been able to negotiate with General Growth Properties or the Weinberg Foundation, which owns the Hilo Hattie Nimitz headquarters, because they are waiting for the judge to approve the sale first, creating a sort of “;chicken-and-egg”; situation.

Ivan Gold, an attorney representing General Growth for the leasing of space at Ala Moana Center and Prince Kuhio Plaza, said he has had numerous meetings with Maui Divers.

The two parties have an agreement in place, pending the approval of the Maui Divers sale, he said, which includes repayment of hundreds of thousands of dollars of deferred rent for the Ala Moana lease.

Hilo Hattie's losses since filing for bankruptcy in October now amount to $6.1 million, while the company lost more than $665,000 for the monthlong period that ended May 30.

                                                                                                                                                                                                                                                                       

LOOKING BACK

Hilo Hattie bankruptcy timeline:

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

» Oct. 9, 2008: U.S. Trustees appoint a nine-member committee of unsecured creditors (including Maui Divers and Royal Hawaiian Creations, both of which later resigned).

» May 19, 2009: Maui Divers offers to buy Hilo Hattie for $1 million plus $2 million in working capital.

» June 15, 2009: Pomare Ltd. files disclosure statement and reorganization plan.

» June 19, 2009: TOC Inc., owner of Hilo Hattie, transfers stock to Donald Kang of Royal Hawaiian Creations. Hilo Hattie CEO Ted Nelson and President John Scott resign. Kang is new CEO and president.

» June 22, 2009: Judge Robert Faris defers for another week motions on the Maui Divers sale, trustee appointment and liquidation.

» June 26, 2009: Pomare files its amended Chapter 11 reorganization plan and disclosure statement.

» June 29, 2009: Faris decides to defer his decision on motions until July 15.

» July 15, 2009: Faris is scheduled to decide on the Hilo Hattie motions.

Source: U.S. Bankruptcy Court