Bids for bankrupt HMX Group are due today, and there’s a chance it could be game, set and match for Authentic Brands Group.
This story first appeared in the December 12, 2012 issue of WWD. Subscribe Today.
Authentic, the owner of the Marilyn Monroe and racquet brand Prince trademarks, is the stalking-horse bidder in the bankruptcy court auction, which is subject to better offers.
Competing bids along with good faith deposits of $7 million are due tonight at 5:15 p.m. A decision is expected to be made on Monday, with court approval Wednesday.
But will anyone else bid? The expectation last week was there would be several other offers, but that changed over the weekend due to supposed pressure from lawmakers to keep HMX’s unionized factories in operation. According to sources, the communications were along the lines of “American jobs are important” and the need to “preserve those jobs.”
Now there seems to be a question of whether those interested in just the trademarks could feel a “chilling” reception, if not outright hostility, and just not bother to make an offer.
Doug Williams, chief executive officer of HMX, said, “We’ve had several presentations with many potential bidders, and management along with the debtors professionals [are] providing support to each one of the potential bidders that are in the process. We are optimistic that it will be a spirited auction, with the company’s assets creating the most value in an ongoing concern bid.”
Last week, the word was Iconix Brand Group, which was said to be the front-runner before the deal with Authentic was struck, was stepping back into the ring. As a brand management firm, Iconix would be interested only in the intellectual property assets, namely the trademarks to the HMX brands, which include Hart Schaffner Marx and Hickey Freeman. Since September, word in the investment community was that Iconix was seeking an operating partner, and any offer likely would be in line with the Authentic deal structure. That means Iconix, if it makes a bid, is guaranteed to at least have its offer be considered since it wouldn’t include a liquidation provision for the operations.
The $72.3 million Authentic agreement is for a going concern sale that has the intellectual property assets going to the brand management and licensing firm and the operating assets to be acquired by existing management. The operating entity, Opco, would become the licensee and pay a royalty fee to Authentic.
Private equity firm Bluestar Alliance, backed by The Carlyle Group, was also said to be intent on placing a bid. Bluestar’s interest has long been said to be for the IP assets. It would still make an offer for the entire business, but that bid would include a liquidation component for assets it doesn’t want.
It is that liquidation component that has become a hotbed of contention, even long before HMX filed for bankruptcy in October.
HMX ran into difficulties in the summer and finally reached a financing deal with Salus Capital Partners, but not before the troubles at the apparel firm garnered attention from lawmakers on Capital Hill.
Sen. Charles Schumer (D., N.Y.) said at the time that he worked with HMX and its lenders to close a deal for the company to secure a new facility with Salus.
Rep. Louise Slaughter, (D., N.Y.) also intervened in August and sent letters to the company’s key creditors, calling for the lenders to continue working with HMX to provide access to credit.
HMX has unionized factory workers in Rochester, N.Y., and in Des Plaines, Ill.
The two legislators held a workers’ rally in Rochester to amp up the pressure to keep the plant open when a bankruptcy filing was likely imminent.
Since the October filing, the union has worked with lawmakers in keeping the “Made in America” focus at the forefront. It also has reached out to firms to try to beef up the bidding options. Although Ron Burkle’s Yucaipa Cos. and Wilbur L. Ross’ WL Ross & Co. have been accessing information via the so-called “data room,” it wasn’t immediately clear whether they would actually submit bids.
Williams is planning as if the company will be sold as a going concern since there’s already the stalking-horse bid from Authentic on the table in case no one else enters the race. While the Authentic agreement has a provision that “toggles” to a liquidation sale if certain purchasing conditions are not met, that’s not expected to be triggered.
According to Williams, Opco has a financing agreement in place with Salus to fund operations going forward, and the ceo said the company has already told the union it would assume the collective bargaining agreement. When pressed further about its terms, Williams said the company is affirming the agreement as is, without seeking to modify any of the current provisions.