The HMX Group bankruptcy process just got ugly.
A group calling itself the “proposed attorneys for the official committee of unsecured creditors” has filed an objection with U.S. Bankruptcy Court against the proposed stalking horse bid from Authentic Brands to acquire the troubled manufacturer, claiming the sale process has been manipulated to the point that it will result in an “artificially low sale price.”
In papers filed late Thursday by Leonard, Street and Deinard of Minneapolis and obtained by WWD, the committee alleges that HMX’s chief executive officer, Doug Williams, “engineered from the beginning to ensure a favorable result for Doug Williams, Salus Capital Partners, and the stalking horse bidder at the expense of the estate and the unsecured creditors in particular. Material terms of the proposed sale were not disclosed until a few days before the auction and in many instances they were never revealed at all. This, of course, served to chill interest in the sale and will chill bidding at the auction as well.”
The papers go on to say that “potential bidders complained repeatedly to the committee about their inability to get comfortable with the transaction because they could not get their hands on critical information. In addition, many of the sale terms that were disclosed were so confusing or ambiguous that theyserved to chill bidding even further. The Committee simply cannot, and willnot, support any sale conducted in such a skewed and unfair manner.”
The group also alleges that Salus, the debtors and Williams “refused to honor basic requests for information” from “an alternative financing source.”
According to sources, CIT is among the firms willing to finance an alternative bid to Authentic Brands’.
The papers say that Williams “stands to have his highly lucrative employment contract assumed by the stalking horse bidder, and will gain control of the debtors’ assets without making any personal investment or incurring any personal liability in exchange. And Authentic Brands “will obtain extremely valuable intellectual property and licensing rights at a remarkably favorable price.”
As a result, the group is asking that the motion by Authentic Brands to acquire the company be denied.