By  on May 7, 2009

Emerisque appears ready to walk away from the bidding for bankrupt Hartmarx Corp. and leave the field to just two.

The bid from the London-based firm was due to expire at 5 p.m. EDT Wednesday and isn’t expected to be extended.

Sources close to the British bidder said the Emerisque offer had already been extended twice and the firm isn’t going to go for a third round.

A so-called stalking horse bidder was expected to be named at the close of business Tuesday, sources told WWD, but that didn’t happen. Creditor groups were said to be bickering over whether a liquidation would provide a higher return to creditors than selling the company to Emerisque as a going concern.

Other bidders include New York-based Mistral Equity Partners and the Los Angeles-based Yucaipa Cos.

Emerisque is said to believe it is being played against the other bidders, in effect in the position of a stalking horse, but without the benefit of a break-up fee had it actually been named as such.

In reality, the problem may lie with Hartmarx’s lenders, who sources said don’t appear to be supporting the company. Banks have been gaining prominence in the course of bankruptcies, placing an ever-higher priority on getting repayment for their loans and giving firms less time to restructure. Firms in Chapter 11 now typically get just two months to find a buyer or, lacking funding to continue operations, find themselves having to liquidate.

Even though Emerisque is walking away, it might still be open to an acquisition of the company should Hartmarx’s creditors be interested in dealing. But Emerisque might be at a disadvantage because it will no longer have access to updated information that may be transmitted to the other two bidders in the game.

Wells Fargo/Wachovia has been threatening to pull financing, a move connected to negotiating tactics regarding the bidding process, sources close to Chicago-based Hartmarx said. Some also said the company had enough funding to make last week’s payroll, but might not have enough to continue to fund current operations without a quick resolution on the sale process.

Last week, lawmakers on Capitol Hill renewed their efforts to prevent Wells Fargo/Wachovia, which received Troubled Assets Relief Program funds, from being the thorn in Hartmarx’s side as it struggles to sell itself. (For more on the Wells Fargo situation, see Memo Pad.) Hartmarx filed Chapter 11 in late January.

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