LESLIE FAY EYES SALE OF DRESS, SPORTSWEAR LINES

Byline: Jeff Siegel

NEW YORK — The Leslie Fay Cos. is weighing the sale of its core signature dress and sportswear business, and John J. Pomerantz, chairman and chief executive officer, has emerged as the leading candidate to purchase the operations.
Leslie Fay — which this year confirmed plans to sell its Sassco division, which makes the Kasper for ASL suit, dress and sportswear brand — revealed plans to sell the Leslie Fay Dress, Leslie Fay Sportswear, Nipon, Outlander, Castleberry and retail operations in court papers filed last week but not announced until Friday.
The court filing dealt with the company’s new contract offer to Pomerantz, whose father, Fred, founded the company in 1947. The offer, which must be approved by Bankruptcy Court Judge Tina L. Brozman, contains lucrative incentives for Pomerantz to continue to engineer the apparel firm’s downsizing.
The decision to consider the sale of the core signature businesses is a sharp departure from Leslie Fay’s earlier plans, which called for unsecured creditors to receive an equity stake in the core businesses plus a payout from or equity stake in Sassco’s suit and sportswear operation.
The earlier plan, contained in the outline of a plan of reorganization, offered Leslie Fay shareholders the possibility of receiving warrants to purchase Sassco shares or, if that business was not sold, warrants to purchase shares in the new Leslie Fay.
In its announcement late Friday afternoon, the troubled maker of apparel said that with the sale of the core businesses, “there can be no assurances that equity holders will retain or receive any value for their investment.”
Shares of Leslie Fay closed Friday up 1/16 to 5/8 in trading on the New York Stock Exchange.
Pomerantz’s contract offer could net the executive as much as $1.5 million in “success fees” after he directs the sale of Leslie Fay’s dress and sportswear divisions or a reorganization plan is consummated.
Pomerantz will continue to receive his annual salary of $800,000, court papers show, until Leslie Fay either consummates a reorganization plan or sells the dress and sportswear lines. Leslie Fay will mark its second anniversary in Chapter 11 next month.
The company was forced into the bankruptcy courts after it revealed that an accounting scandal had misstated earnings over three years ending in 1992, later determined by federal investigators to be $119 million. Its former controller, Donald F. Kenia, is the only executive to be charged with any wrongdoing, although Pomerantz was relieved of his financial responsibility.
According to the terms of the proposed deal, once a plan is consummated, there are several scenarios under which Pomerantz would receive various success fees as he begins his tenure at the “New Leslie Fay,” as it is referred to in court papers.
Three of the scenarios involve the disposition of Leslie Fay’s dress and sportswear divisions. Pomerantz would earn between $500,000 and $1.5 million depending on whether none, one or both of the divisions are sold as a going concern.
Also, Pomerantz would receive $1 million in cash and $500,000 in stock in New Leslie Fay stock on the effective date of a reorganization plan if he is offered and accepts a contract as ceo for at least two years at a salary of at least $500,000, plus unspecified stock options.
If the employment offer is made and Pomerantz declines, he would receive $1.25 million when the plan is consummated. If Pomerantz is not offered a contract, the contract calls for him to get $1.5 million in cash after the plan becomes effective.
Sources close to the company said Pomerantz would like to remain at the helm of the business, even if it’s a shadow of its former self. One source pegged Pomerantz as the likely purchaser or matchmaker in a deal for the core businesses. Pomerantz declined to comment Friday on the latest developments.
Leslie Fay, with sales of $429 million in the nine months ended Oct. 1, 1994, announced its intention to keep Pomerantz as chairman and ceo on Jan 25.
— Fairchild News Service