Byline: Jeff Siegel

NEW YORK — Arthur Levine, the chairman of Leslie Fay Cos.’s Sassco division, will not get to purchase his profitable sportswear operation as part of the Leslie Fay Chapter 11 reorganization, a source close to the situation said Monday.
Instead, he said, the unit will be spun off to creditors. The source refused to reveal how or why Levine’s purchase attempt broke down, but said creditors had gotten impatient with Levine and opted to have the unit spun off.
Adding to the urgency of a Sassco decision was an ultimatum from the bankruptcy judge overseeing the Leslie Fay case, threatening to liquidate the apparel maker’s assets if it again postpones a hearing on its disclosure statement in its long-running Chapter 11.
In an interview with WWD, a testy Levine denied that his attempt to purchase Sassco was dead and buried. He said that even if the division is spun off to creditors, he would still be a partner.
“Whether or not I have the financing doesn’t matter,” Levine said. “I’ll still be a partner. No matter what happens, I will be a partner.”
Levine has been trying for more than a year to line up financing to purchase the Sassco unit, Leslie Fay’s most profitable unit. His inability to secure adequate financing was one reason Leslie Fay had put off filing an amended disclosure statement detailing how it would pay creditors in a reorganization.
Levine refused to provide details about the circumstances under which he would be a partner if Sassco is spun off. But another source said Levine will very likely end up as a minority owner of Sassco, not the majority ownership he had originally sought.
The source added that one of the main sticking points in the negotiations between creditors and Leslie Fay is how much of an equity stake Levine and other Sassco executives will get.
If Sassco is spun off, as well-placed sources insist, Sassco’s creditors would get the vast majority of shares in the company. Sassco’s creditors could then hold onto the stock or sell, possibly in an initial public offering, a source noted.
Rumors that Levine was having trouble financing his proposed purchase of Sassco have dogged the executive since he announced his interest, but he has consistently said he was close to cementing a deal.
Leslie Fay has long maintained that it would either sell the division to a group led by Levine or spin it off to creditors as part of its Chapter 11 reorganization.
Chaim Fortgang, of Wachtell, Lipton, Rosen & Katz, counsel to Leslie Fay’s creditors’ committee, refused to comment on negotiations involving Sassco or Levine.
Meanwhile, fed up with the sluggish pace of The Leslie Cos.’ Chapter 11 reorganization, Bankruptcy Judge Tina Brozman Monday threatened to liquidate the firm’s assets if it postpones its next scheduled disclosure statement hearing.
“If you are unable to hold a hearing by April 17, I may serve you with a motion to convert or dismiss this case,” Brozman warned an attorney for Leslie Fay at a hearing Monday.
A Leslie Fay spokesman said the company “understands and respects the judge’s concern and will do all it can to meet the deadline.” But, the spokesman added, Leslie Fay is “just one of several parties in the case.”
Wachtell’s Fortgang said Leslie Fay will file a plan and hold a hearing prior to the judge’s deadline.
The apparel maker is expected to file an amended disclosure statement and reorganization plan by April 8 in preparation for the April 17 hearing.
Brozman was apparently annoyed that Leslie Fay — operating in Chapter 11 since April 1993 — was asking for more time to file its amended disclosure statement and plan of reorganization.
Leslie Fay’s disclosure statement, which provides an outline of the reorganization plan, was originally supposed to go before the court on Jan. 24, but was adjourned until March 4.
The apparel maker predicted it would need a second adjournment during an unrelated court hearing last week. At the time, an agitated Brozman told Leslie Fay’s lawyer, “I’m sure I don’t need to tell you how I feel about this.”
The attorney blamed the postponement on “continuing negotiations” between Leslie Fay and its creditors. He declined to say if the negotiations were centered on Sassco.
— Fairchild News Service

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