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PEI Acquires Bankrupt Tropical

NEW YORK — Tropical Sportswear International’s long struggle to survive came to an end Thursday while ushering in a new era in the life of the rapidly expanding Perry Ellis International Inc.<BR><BR>Miami-based PEI agreed to purchase the...

NEW YORK — Tropical Sportswear International’s long struggle to survive came to an end Thursday while ushering in a new era in the life of the rapidly expanding Perry Ellis International Inc.

Miami-based PEI agreed to purchase the assets of Tampa-based Tropical for approximately $85 million following a Chapter 11 filing by Tropical in U.S. Bankruptcy Court for the Middle District of Florida. The acquisition is subject to numerous conditions, including bankruptcy court approval, and the purchase price, funded by PEI’s senior credit facility, is subject to adjustment based on inventory and accounts receivable evaluations.

However, if it goes through as scheduled next February, it will immediately and dramatically increase PEI’s presence in the bottoms business. In a conference call to discuss the transaction, George Feldenkreis, chairman and chief executive officer of PEI, estimated it would lift the percentage of the company’s sales attributable to bottoms to 40 percent from its current level of about 20 percent.

According to documents filed with the bankruptcy court, TSI had assets totaling $26.2 million and a secured debt load of $338,081 as of Dec. 15. The company listed SunTrust as the largest holder of an unsecured debt claim at $105.5 million. According to the filing, the company estimates it will have the funds to distribute to unsecured creditors.

According to a statement from TSI, a new $50 million debtor-in-possession credit facility has been granted by the CIT Group and Fleet Capital, allowing the company to continue operations while completing the sale. The company also said it has hired turnaround specialist firm Alvarez & Marsal as a financial adviser.

Even with its DIP facility, the Tropical filing most likely brings to an end a struggle to stay in business despite a series of challenges going back more than two years. Despite persistent efforts by its management, the firm never regained its footing after the dismissal of former ceo Bill Compton and incurred net losses of $131.5 million in its last full fiscal year. Various asset sales had failed to reverse the trend. Even with losses mounting and volume declining, the firm was still believed to be the third-largest maker of casual slacks in the U.S., behind only Levi Strauss & Co.’s Dockers unit and Haggar Corp.

Oscar Feldenkreis, president and chief operating officer, said on the call, “This strategic move is a critical response to the current environment of the retailing mergers and acquisitions.”