The future of bankrupt Hartmarx Corp. hangs in the balance more than ever, with the time frame for objections to London-based private equity firm Emerisque as the stalking horse bidder extended to today.

This story first appeared in the May 29, 2009 issue of WWD. Subscribe Today.

The original deadline for objections was Thursday, but a last-minute extension was granted by the Chicago bankruptcy court as negotiations continue between the constituents, according to a well-placed source. Against that backdrop, there’s been continuing chatter that Wells Fargo/Wachovia, Hartmarx’s lender, is continuing to push for a liquidation of the clothing firm despite public pressure from union officials and lawmakers to allow the sale of the company as a single entity, preserving thousands of U.S. jobs in the process.

“Wells Fargo is pressuring the board to reverse its decision on naming Emerisque the stalking horse bidder,” said Bruce Raynor, the suspended general president of UNITE HERE, the union that represents Hartmarx workers. “[Wells Fargo’s] logic is they want to liquidate the company, but now the spotlight of public opinion has been focused on them, they do not want to take responsibility for their conduct.”

Raynor alleged the bank is attempting to pressure Hartmarx toward liquidation and “not take the blame for it.”

He said he believes the Obama administration will weigh in shortly on the matter, although he has not spoken personally with Treasury Secretary Timothy Geithner. A group of 43 House lawmakers sent a letter to Geithner last week calling on him to intervene and allow the sale of Hartmarx to a viable bidder despite pressure from Wells Fargo, a recipient of $25 billion on Troubled Assets Relief Program funds.

A spokesman for Rep. Jan Schakowsky (D., Ill.), who helped spearhead the effort to send the letter, said the lawmakers have not yet had a response from Geithner.

“Obviously, her chief concern is saving jobs and creating jobs,” said the spokesman. “That holds true for Hartmarx employees and the 600 who live in her district. She is continuing to work with Wells Fargo, Hartmarx, the Treasury Department and her colleagues in Congress to make sure everything is done to prevent job loss.”

A Capitol Hill aide with knowledge of the situation, who spoke on condition of anonymity, commented, “It appears that Emerisque is a serious bidder and that Wells has indicated that they would entertain serious bids. Congress is watching to see if that is what happens and if they [Wells Fargo] are going to be moving this process forward and negotiating with that in mind.

“Wells Fargo has a potential to become a poster child for what is wrong with TARP recipients if they don’t negotiate in good faith,” he concluded.

A spokeswoman for Wells Fargo declined comment.

Despite the down-to-the-wire negotiations said to be swirling around the Emerisque bid, Homi Patel, Hartmarx’s chairman and chief executive officer, said the increased chatter about liquidation is speculative and that such action is no more likely now than it was earlier in the week. Emerisque was designated as the stalking horse bidder on May 21.

While the Emerisque transaction is valued at $119 million, including the assumption of liabilities, the actual cash component is $70.5 million, not enough to satisfy the bank lending group led by Wells Fargo/Wachovia, sources familiar with the bankruptcy said. Wells Fargo has said Hartmarx owes the bank more than $114 million and the bank appears to believe it will get the best return through a liquidation.

If Hartmarx is forced to liquidate, the firm could be split up among various bidders. New York-based Mistral Equity Partners could come back into the game and bid for several brands acquired by Hartmarx, including Exclusively Misook, Monarchy and Christopher Blue. Sources said Los Angeles-based Yucaipa Cos., which was interested in the men’s brands Hart Schaffner Marx and Hickey Freeman, has dropped out of the process. Spencer Hays’ IAC and a Chicago-based investment group led by designer Joseph Abboud are expected to bid for the men’s brands.

The sale of Hartmarx, which filed for Chapter 11 bankruptcy protection in January, also juxtaposes two competing economic components of valuating a business. Anyone buying the business would be including in the purchase price a discount value for the next year or two reflecting both the time needed to restructure operations and the current depressed state of various assets. An immediate valuation in a liquidation wouldn’t need to include the discount for future earnings.

Valuations on the apparel brands aside, there are also questions about how much can be raised from the sale of Hartmarx’s real estate holdings and other property. Commercial real estate — like almost every other business sector— is in the midst of a downturn, and the factories have little value these days, given the shrinkage of American apparel manufacturing.