Pomare Ltd. dba Hilo Hattie is on the path to emerging from bankruptcy next month after a federal court confirmed its reorganization plan yesterday morning.

U.S. Bankruptcy Judge Robert Faris said he was happy to see the case come to a successful conclusion.

The company expects to rise from bankruptcy on Oct. 4, according to Hilo Hattie attorney James Wagner. The emergence from bankruptcy would coincide with the beginning of a new fiscal year and would be about one year after Hilo Hattie first filed for Chapter 11 bankruptcy reorganization.

It means that the 46-year-old business' six retail stores on four major isles of Hawaii, in addition to its Nimitz Highway headquarters, will remain open for business as usual.

But staff cuts are ahead to reduce overhead, according to court documents.

In its plan, filed in July, Hilo Hattie says it will repay its unsecured creditors 5 percent of what they are owed in equal installments over five years, without interest, beginning on the first anniversary of the day it emerges out of bankruptcy.

Another group receives 20 percent of what they are owed 30 days after emergence from bankruptcy.

The company owes from $20.2 million to $22.2 million in debts, with at least $15.5 million of that total in unsecured claims.

If the company were to be liquidated, creditors would have gotten less than they would have received under the plan, or nothing at all.

Instead of an aggressive growth strategy as envisioned by previous owner TOC Inc., Hilo Hattie plans to open one or two additional stores, including a 2,400-square-foot store at a historic beach resort hotel in Waikiki, in the near future.

Wagner said that since the lease has not been signed, he could not disclose the location.

Hilo Hattie also will focus on increasing revenue from e-commerce, uniform sales and higher-margin merchandise.

“;Hilo Hattie will continue to grow, and we hope it will prosper,”; Wagner said.

Donald B.S. Kang, who became chief executive officer of Hilo Hattie after stock was transferred to him in June, already has contributed $1 million from the court-approved loan to purchase more inventory for the business.

Upon emerging from bankruptcy, he's agreed to commit an additional $2 million in capital.

Kang, owner of Royal Hawaiian Creations, a manufacturer of aloha apparel, is also expected to move his operations to the Nimitz headquarters and pay $24,000 a month in rent.

Maui Divers Jewelry, which at one time was interested in buying Hilo Hattie, withdrew its request in July and agreed to renew its concession agreement with the company.

Hilo Hattie also settled a mechanic's lien filed by Brett Hill Construction for escalator work done at Royal Hawaiian Center, where it was originally going to open a flagship store.

For the 30-day period ended Aug. 1, Hilo Hattie recorded a loss of $573,034, and a cumulative loss of $7.6 million since filing for bankruptcy.

Hilo Hattie expects sales to stabilize and increase in fiscal year 2011 and after. Sales for fiscal years 2010 through 2014 are projected to increase to $51.9 million from about $28.8 million.