Byline: Jeff Siegel

NEW YORK — Arthur Levine, chairman of The Leslie Fay Cos.’s Sassco division, and his management team will get only a 10 percent stake in the reorganized Sassco, according to Leslie Fay’s revised reorganization plan.
The plan confirms a report printed March 5 in WWD and all but dashes Levine’s longstanding goal to purchase the highly profitable division for $226 million.
Levine’s proposed deal fell apart, sources said, because he was unable to secure adequate financing.
Although Levine will be given 10 percent of Sassco’s equity — a far cry from the 30 percent he was supposed to receive under the original spinoff option — he will get an annual salary of $1.75 million as the division’s president and chief executive officer for five years.
The remaining 90 percent of Sassco’s equity will be paid to Leslie Fay’s creditors as part of its Chapter 11 plan, court papers show.
In addition to his salary, Levine will be paid a bonus if Sassco’s earnings before interest and taxes (EBIT) reach 80 percent of targeted earnings. Levine will receive $43,750 for each percentage point of EBIT in excess of 80 percent of the EBIT target, up to $1.75 million.
The targeted earnings level was not disclosed. It “will be set by [the] reorganized Sassco’s board of directors,” which will be divided 70-30 between creditors’ designees and Levine’s designees, court papers show.
The reorganization plan states that Levine and other Sassco executives receiving Sassco stock will not be able to sell the shares before the fifth anniversary of the date Leslie Fay exits Chapter 11.
In a telephone interview with WWD Monday, Levine said the plan is “not finalized” even though it has been agreed to by Leslie Fay and the creditors’ committee.
“This is an offer,” Levine said. “There are details that still need to be resolved.” He refused to discuss those details.
As part of the spinoff, Sassco will attempt to borrow $125 million under a term loan agreement. If Sassco is unable to borrow the money, the plan enables the division to issue $125 million in notes.
An amended disclosure statement filed with the revised reorganization plan was not immediately available.
The filing of the plan and disclosure statement come less than two weeks after Bankruptcy Judge Tina Brozman threatened to liquidate the company if it did not file papers before April 8 in preparation for a hearing April 17.
A Leslie Fay spokesman said Leslie Fay is still working on obtaining post-confirmation financing. — Fairchild News Service

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