NEW YORK — The $100 million cash sale of Gitano Inc. to Fruit of the Loom was held up Monday for a day by a bankruptcy judge in order to study a claim by the National Labor Relations Board concerning back pay.
The judge, Jeffry H. Gallet, told the parties to expect a hearing on the sale today. A quick sale of Gitano is imperative because of the March 21 deadline for placing holiday orders by Wal-Mart Inc., Gitano’s largest customer, said Michael Wiles, of Debevoise & Plimpton, counsel to Gitano. Wal-Mart will not buy merchandise from Gitano until the brand is sold.
Citing the company’s dependence on Wal-Mart, the lack of time to develop other retail customers and Gitano’s cash drought, Wiles argued that Gitano had “no alternative to the sale.” “Otherwise, the buyer [FTL] will be without 2 1/2 months of revenues and there will a loss of future shelf space,” Wiles said. As for Wal-Mart’s insistence that Gitano’s business be sold before the chain lifted the boycott versus Gitano, Wiles called the move “an ultimatum that put a gun to the head of Gitano.”
Explaining why Gitano accepted FTL’s offer for its assets, Wiles told the court that the bid was much higher than the others. Also it did not include any finance conditions and FTL agreed to retain most of Gitano’s employees, thereby reducing Gitano’s costs.