Homestead seeks bankruptcy sale

By Staff -- Home Textiles Today, 10/26/2006 10:10:00 AM

Reno, Nev. — Millwork Trading, a division of Li & Fung, is the stalking-horse bidder for the remaining assets of Homestead’s textile business under a Section 363 sale that will see the proceeds used to fund a Chapter 11 liquidation plan, according to documents filed with the U.S. Bankruptcy Court here.

The proposed purchase price is $250,000 in cash, plus 43% of Homestead’s standard cost of inventory, 85% of the face value of eligible accounts receivable, and other considerations. Elsewhere, the court documents indicated the total value of the purchase might be about $7.8 million.

The sale includes most of Homestead’s assets, licenses and trademark agreements, including Angela Adams, Collier Campbell, Lisa Jenks, Peacock Alley, Galbraith & Paul, Preston Bailey and Nancy Koltes. The sale is also contingent upon employment agreements with Steven and David Greenstein, who headed Homestead.

A Section 363 sale is a bankruptcy court-sanctioned sale of a company’s assets. It gives the court, if needed, the ability to "cram down" a reorganization plan commonly monetizing a company’s assets to seek both the maximum and immediate cash value — factors that often play mostly to the benefit of the secured creditors.

Millwork has made a $400,000 good faith deposit toward the closing of the sale, which must occur no later than Dec. 15, 2006. In the interim, an auction will be held here if competing qualified bids are received, according to the bid procedures filed with the court, requiring an initial overbid of $200,000.

Homestead is the sole remaining asset in the London Fog Group bankruptcy, filed last March. It was Homestead, under Greenstein, that brought London Fog out of its earlier bankruptcy in 2004 with a $100 million purchase. Following the more recent filing, the company sold off the London Fog business for $37.5 million in August, and sold its Pacific Trail unit for $20.4 million last April.