Progress Illinois

Today marked a critical juncture for the employees of bankrupt suitmaker Hartmarx, Inc.  This evening they can breath a sigh of relief. 

Two hours ago, in federal bankruptcy court, Judge Bruce W. Black approved British private equity firm Emerisque as the "stalking horse" bidder to purchase the company.  If he and the relevant parties -- most importantly, creditor Wells Fargo -- had failed to come to such an agreement, liquidation of the company would have begun immediately and 1,000 Illinois workers would be out of a job.  "We are quite pleased with the progress and optimistic," Workers United Midwest Treasurer Joe Costigan said after the hearing, flanked by Hartmarx workers from the Des Plaines factory. "This was a huge day for us today." (Catch up on the full story here.)

State Treasurer Alexi Giannoulias was also on hand at the Dirksen Federal Building in downtown Chicago (he is pictured above right with Hartmarx employee and union leader Ruby Sims).  "It's a great step forward for the hard-working, loyal, and committed workers of Hartmarx who have dedicated their lives to the success of this company," he said. "The difference between Friday and today is just extraordinary."

Indeed, 72 hours ago the acrimony between Wells Fargo and Emerisque was on full display -- in press release form.  The bank kicked it off by putting out a statement in which they officially opposed the Emerisque offer, arguing that the cash amount was too low and asserting that the firm intended to shut down the company's Rock Island plant within three months.  Shortly thereafter, Emerisque shot back, calling the latter claim "simply not truthful" and concluding, "It would appear to us that Wells Fargo prefers a liquidation."

But over the weekend, the talks apparently continued -- this time in human form -- and a resolution was reached. 

Most importantly, Emerisque revised its cash offering from a numerical amount (the equivalent of around $56 million in the original bid) to a percentage of the debtor-in-possession (DIP) financing provided by Wells Fargo and the lending group to keep Hartmarx operating during the bankruptcy process.  As one of the lawyers for Emerisque explained during today's hearing, this is favorable to the creditors because it means "if the DIP goes up [in the coming weeks], the purchase price goes up."

An attorney representing the lending group estimated that, if the Emerisque bid is ultimately approved, this change will amount to $25 million more up front.  He also mentioned the creditors' belief "that there is value in letting the bid go forward and keeping Hartmarx open."

The prospect of liquidation loomed large over the hearing. It was repeatedly referenced as a potential outcome. Meanwhile, a handful of Hartmarx employees sat in the front row of the small chambers, inches away from the seated lawyers.  During the proceedings, one of the workers, an older Indian woman, leaned forward and got the attention of an attorney, telling him in a hushed voice, "We're good people.  Good people."

Following the agreement, Giannoulias thanked "Emerisque and Wells Fargo for being good corporate citizens."  He also cited the "team effort" on display this past month.  If you peruse our past coverage of the dispute, you'll see that a broad cast of characters -- most importantly, the workers themselves -- have continually kept the pressure on since early May.

So what happens next?  Additional bidders now have until June 22 to make their interest known in the company (and there were several potential ones on hand at today's hearing).  However, any additional bids will have to exceed Emerisque's offer in order to be considered by the court.  An auction will follow on June 24, followed by the sale of the company on June 25.

But the workers aren't celebrating yet. After all, while Emerisque has expressed its intention to keep the company operating here in the United States, other bidders may surface in the coming weeks and no one knows what their intentions may be. 

"We like where we stand," Costigan remarked today. "But we have said throughout that we are going to remain vigilant. We are not out of the woods by any circumstance."

Full disclosure: Workers United is an affiliate of the Service Employees International Union.  The SEIU Illinois State Council sponsors this website. 

Image courtesy of Heather Stone.