JENNA LANE CONVERTS TO CH. 11, GAINING LEEWAY TO RESTRUCTURE
Byline: Vicki M. Young
NEW YORK — Jenna Lane Inc., a women’s sportswear firm, on Thursday received Manhattan bankruptcy court approval to convert an involuntary Chapter 7 bankruptcy petition filed against it to a voluntary Chapter 11 petition.
The Chapter 11 classification gives the company time to try to restructure its operations. The Chapter 7, filed on June 30, called for a liquidation of its operations. The Chapter 7 was filed by three creditors, whose claims totaled $696,625. The creditors were: CIT Commercial Services Inc., claiming $576,000; Finova Capital Corp., $66,612; and GMAC, $54,013.
In an affidavit filed with the court, Charles Sobel, president of the sportswear firm, explained that the company’s financial difficulties arose from its inability to control costs of its domestic operations. Even though sales remained constant at an annual volume of $73 million, those costs eroded profit margins. Jenna Lane manufactures through domestic contractors and imports from overseas suppliers, according to Sobel.
Sobel added that its ability to pay for goods was adversely affected by a cash crunch when its profitability declined because HSBC Business Credit, formerly Republic Factors Corp., became less inclined to increase the overadvance on the factoring agreement. In addition, Sobel said, some of Jenna Lane’s volume customers have cancelled orders for Fall delivery because of concern over the firm’s ability to deliver on those orders.
HSBC is Jenna Lane’s sole secured creditor. The sportswear firm is seeking bankruptcy court approval of its debtor-in-financing agreement with HSBC. Prior to the Chapter 11 petition, HSBC had advanced Jenna Lane in excess of $11 million, and held factored accounts of $9.3 million.
Jenna Lane estimated total assets of $6.05 million as of June 30, which include $4.8 million in inventory, $1 million in tax refunds and $250,000 in non-factored accounts receivable. Liabilities were $6.38 million, with $2.08 million in secured claims and $4.3 million in unsecured claims. Including the HSBC factoring agreement, aggregate assets are closer to $16 million, with liabilities at $17 million.
Top unsecured creditors include: The CIT Group, Charlotte, N.C., $919,242; GE Capital, Charlotte, $448,739; Clare Freight International, Jamaica, N.Y., $386,500; Bank of America, Atlanta, $286,822; Dyersburg Fabrics Inc., Atlanta, $195,326; and Tandler Textile Inc., New York, $151,043.
The bankrupt firm also reported three pending legal actions in which it is a defendant, and one completed action resulting in a judgment against the firm. In the latter, the firm settled an action by Nissho Iwai Textiles (USA) Inc. in a New York state court for $40,099. The pending actions are: claim for nonpayment of rent filed by Gettinger Associates in Civil Court in Manhattan; an accounts payable action by Richline Textile Inc. in a federal court in Los Angeles; and a workman’s compensation action filed by Alison Perreira in a New Jersey court in Hudson County.
Top holders of Jenna Lane stock, which trades on the over-the-counter board, are: Cede & Co, here, 3.25 million shares; Sobel, Colts Neck, N.Y., 428,714; Lawrence Kaplan, Smithtown, N.Y., 221,093; G-V Capital Corp., Hauppauge, N.Y., 104,761; Lawrence Kaplan and Helaine Kaplan, Smithtown, 104,753; and Nimbus res Sociedad Anonima, Costa Rica, 15,000. Shares of the stock were delisted from Nasdaq on Feb. 1.
The firm maintains headquarters at 1407 Broadway, and rents a warehouse facility in Secaucus, N.J.
Jenna Lane manufactures apparel under the trade names Jenna Lane, T.L.C. for Kidz, Bongo, Impatiens, Eric Charles and Smart Objects.