By and  on May 14, 2009

Bankrupt Hartmarx Corp. is seeking a six-month extension of its exclusive right to file a plan of reorganization as bankers continue to finalize a two-party bid for the firm that has a cash value of $70 million.

Chicago-based Hartmarx, which filed for Chapter 11 bankruptcy court protection on Jan. 23, has until May 23 to file its reorganization plan. The extension, if granted, would give the distressed firm an additional 180 days, or until Nov. 23, to file a plan, and next Jan. 22 to solicit creditors’ approval.

Hartmarx also is seeking a three-month extension, until Aug. 21, for when it has to decide which leases to assume or reject.

Sources said Hartmarx bankers are continuing to cobble together a combined “stalking horse” offer from two bidders. The plan would have the firm’s assets split up between New York-based Mistral Equity Partners and Los Angeles-based Yucaipa Cos.

Sources familiar with the process said the $70 million amount on the table likely would give creditors a return of just pennies on the dollar.

These sources said the new bid requires another round of due diligence, which could lower the cash consideration as inventory and asset valuations typically decline over time. In addition. Yucaipa is said to require financing to get the deal completed.

Wells Fargo Foothill/Wachovia Capital Finance, part of the bank group that is providing Hartmarx with bankruptcy financing, has been under fire from union groups alleging the bank is pushing for liquidation of the Chicago-based manufacturer. Wells Fargo pointed out it has continued to finance the operations of Hartmarx, even though, it says, Hartmarx has been unable to repay more than $114 million owed to the bank group. According to Wells Fargo, “Despite extensive marketing, Hartmarx has no credible offers to be acquired, but the bank group continues to work with Hartmarx to find potential buyers.”

Sources close to London-based Emerisque, which let its bid expire, do not expect the firm to step back into the bidding process.

Meanwhile, another voice joined the growing chorus of lawmakers demanding that Wells Fargo allow Hartmarx to be sold to a viable buyer. Demanding that the bank avoid liquidation, Sen. Charles Schumer (D., N.Y.) sent a letter to John Stumpf, chief executive officer of Wells Fargo, on Tuesday urging the bank to “select a bid for the company that would keep it operating and allow it to come out of bankruptcy intact and operational, preserving some 600-plus jobs in Rochester and scores more in Buffalo.”

In a separate move, the Service Employees International Union and Workers United, which represents Hartmarx, plan to launch a “Keep America Working” hotline and new Web site today to help “workers and small business owners to preemptively protect jobs in our communities and hold taxpayer-financed banks accountable for actions that undercut a meaningful economic recovery.”

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