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Bidding for Hartmarx at Crucial Juncture

Bidding for the assets of bankrupt Hartmarx Corp. is at a critical stage.

Bidding for the assets of bankrupt Hartmarx Corp. is at a critical stage.

Three final bids were to be unsealed over the weekend as secured and unsecured creditors begin comparing the proposals. They have a company-imposed deadline of Friday to select a so-called “stalking horse” bid, sources close to the bidding process said.

Sources said the company’s preference is to lock up the sale process before it begins negotiations on an extension of its debtor-in-possession financing facility that is set to expire in July. Hartmarx filed for Chapter 11 bankruptcy court protection in January.

All three bids are said to be from private equity groups. One bidder is believed to be a Midwestern financial consortium. A month ago, men’s wear designer Joseph Abboud surfaced as an interested party whom sources suggested was connected to the group, but he has declined comment regarding an interest in the 137-year-old Hartmarx.

Another bidder sources cite is private equity firm TPG, formerly known as Texas Pacific Group. Based in Fort Worth, TPG has invested in Swiss leather goods maker Bally International, J. Crew Group and Neiman Marcus Group, which it coowns with private equity firm Warburg Pincus. Executives at TPG could not be reached for comment.

Sources said the third is London-based Emerisque, a private equity firm that specializes in turnaround situations. Cofounded in 2003 by Ajay Khaitan, its previous apparel investment with Sun Capital Partners and The 180 Group was denim brand Lee Cooper. A spokeswoman for Emerisque declined comment.

It could not be determined what the final bids are, but earlier nonbinding proposals from about a month ago were believed to have ranged between $95 million and $115 million for the entire company. Only one of the final three bids is apparently without any contingencies.

Sources said Emerisque can close fairly quickly because it doesn’t need to obtain financing to complete the deal or conduct due diligence on the value of existing inventory. Emerisque is also viewed by a textile source as likely to keep the Hartmarx operation intact, a move that would keep most of the existing jobs in the U.S., this person said.

A debtor’s options are liquidation, piecemeal sale or a buyer for the entire operation. Bankers and financial sources close to the Hartmarx bidding process said the sale is focused just on bidders interested in the entire company as a going concern.

One source also said liquidation is not the answer, as it might pull in only around 25 cents on the dollar given the current economic downturn. The question is whether creditors, who remember a more flush period when valuations were higher, can be convinced.

There are said to be three other parties itching to get invited to the party, but they have been locked out thus far, since they are interested in only certain assets. One is apparently IAG, the apparel firm led by Spencer Hays. IAG has declined comment regarding its interest in Hartmarx. One banker said Hays is interested only in the firm’s Hickey Freeman division.

Two others are said to be interested in Hickey Freeman and Hart Schaffner Marx. One of those is private equity firm J.W. Childs Associates. A source close to J.W. Childs said it was interested in moving manufacturing to Fall River, Mass., where the private equity firm could create synergies with the operations of its Joseph Abboud brand.