By and  on October 21, 2009

Fred Leighton Holding Inc. is close to finding a stable home.

On Monday, a set of investors that includes former Barneys New York principal Bob Pressman asked a judge to approve its $25.8 million bid for the 38-year-old vintage fine jewelry brand in U.S. Bankruptcy Court in Manhattan. According to court documents, the prospective offer came from a group made up of Och-Ziff Capital Management Group, jewelry firm Kwiat and Triton Equity Partners, where Pressman serves as chief executive officer.

Kwiat and Och-Ziff declined comment Wednesday, and Pressman could not be reached.

The proposal calls for Och-Ziff, Triton and Kwiat to assume control of the Leighton business including, among other aspects, its intellectual property, leases on the firm’s stores and certain jewelry assets.

A financial source said once the bid is approved, Kwiat would manage the Fred Leighton business with backing from Och-Ziff and Triton. All three firms are investors in the group, the source said.

The bid is expected to gain approval from the court because Merrill Lynch, Fred Leighton’s largest creditor, has already signed off on the arrangement. The parties hope to close the sale by Nov. 10 and are due before the court for a hearing on Nov. 6. Should the sale go through, it will end a rancorous 18-month bankruptcy, but it could be argued the firm’s troubles can be traced to April 2006.

It was then that Ralph Esmerian, the fourth-generation fine jewelry dealer, acquired Leighton, in cooperation with lending partner Global Asset Based Finance Group, a division of Merrill Lynch, for an undisclosed sum.

The firm’s founder, Fred Leighton, whose given name is Murray Mondschein, left the business and Esmerian did what he knows best — acquired resplendent jewelry to sell at the stores. But many in the industry criticize Esmerian’s lack of financial know-how. When the economy declined in 2008, Merrill Lynch sought to pull back its investment in Leighton, seeking the repayment of the $183.3 million it had loaned to Esmerian. At the time he could only repay $10 million.

To repay the loan, Merrill Lynch helped facilitate an auction with Christie’s called “Rare Jewels and Gemstones: The Eye of a Connoisseur.” The lot, which Esmerian put up as collateral through Leighton, contained some of Esmerian’s finest pieces, including a large pink diamond and a brooch and stomacher worn by Napoleon III’s bride, Empress Eugénie, on her wedding day in 1853. Esmerian fought the sale in court, saying he could fetch higher prices through his own network of clients than the auction house could.

The sale, which was slated to take place in April 2008, was aborted when Esmerian put Fred Leighton Holding into Chapter 11 bankruptcy protection. The aforementioned pieces were sold independently. The brooch — which was estimated to bring in up to $6 million at Christie’s — was sold privately, through Christie’s, to the Louvre in Paris. The brooch and the diamond were said to have brought in a total of $20 million. The remainder of the lot from the aborted sale, as well as some additional Esmerian and Leighton pieces, went on the block Wednesday night at Christie’s in an auction called “Rare Jewels and Objets d’Art: A Superb Collection.” According to a source close to the deal, the sale is estimated to bring in $22 million to $25 million. Court records showed proceeds from the latest Christie’s auction would help fund Leighton’s exit from bankruptcy.

Leighton has three stores: a 2,000-square-foot Madison Avenue flagship, a 1,800-square-foot Las Vegas store in The Bellagio and a 1,600-square-foot store on Beverly Hills’ Rodeo Drive. The Beverly Hills unit was masterminded in 2008 by Leighton’s onetime president Peter Bacanovic, the former Merrill Lynch broker who was fired, banned from the securities industry and who completed a jail term for insider trading. Part of Bacanovic’s mission as president was to re-emerge from bankruptcy, open stores in Asia and the Middle East, redesign the Web site and launch an advertising campaign.

Calls to Fred Leighton on Wednesday went unreturned.

In January of this year, Esmerian relinquished control and authority over all aspects of Fred Leighton Holdings Inc. to Thomas Shull, ceo of Meridian Ventures LLC, who is now chief restructuring officer-plan facilitator of Fred Leighton. The company’s chief financial officer, Satyajit Bose, stepped down earlier this year for “personal and professional reasons,” according to Esmerian.

In the Nineties, Shull oversaw the bankruptcies of R.H. Macy & Co. and Barneys New York, which eventually led to sales of the two retailers. Speculation had swirled as early as January that the turnaround specialist had lined up his former colleague Pressman as a possible investor.

A financial source with knowledge of the Chapter 11 proceedings said a separate group of investors, which includes estate jewelry firm Windsor Jewelers Inc. and retired Fred Leighton founder Mondschein, would take on a significant portion of the remaining Fred Leighton jewelry inventory. The second group would not be involved with the business going forward, the source said. None of the members of that group, which also includes Sima G. Ltd., Moonbeam Consulting and European Arts & Antiquities, could be reached for comment at press time.

Kwiat, a 100-year-old jewelry wholesaler, has recently branched into retail with stores on Madison Avenue and in Las Vegas. Earlier this month, it opened a boutique in Macau.

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