(Last updated: July 3, 2009)
In late January, just days after Barack Obama wore one of their suits to his inauguration, 122-year-old clothier Hartmarx, Inc. declared bankruptcy. Bloomberg reported at the time that the company had cited a "decline in clothing purchases, particularly luxury items, coupled with lower borrowing capacity under a senior credit facility" as the factors leading to the bankruptcy filing.
That "senior" creditor, Wells Fargo, agreed to extend a $100 million debtor-in-possession loan to keep the company operating during the proceedings and, by early May, Hartmarx had attracted three potential buyers. According to reports at the time, two of the bidders intended to keep the company intact, while the third favored liquidation. Word quickly spread that Wells Fargo, seeking a quick return, was leaning towards the latter as its favored "stalking horse" bidder.
The Fight Begins (5/4-5/19)
This news of a potential liquidation led workers, union leaders, and members of Congress to spring into action to aid the company, which employs nearly 4,000 people nationwide, including 1,000 in Illinois.
Rep. Phil Hare, who spent 13 years as a Hartmarx employee, described himself as "livid" at the bank, which accepted $25 billion in federal bailout funds. He went on to enlist the help of Rep. Barney Frank (D-MA) and Sen. Chuck Schumer (D-NY). Rep. Jan Schakowsky, whose great-aunt found a job with Hartmarx after emigrating from Russia, called Wells Fargo CEO John Strumpf and urged him to keep the company running.
On May 7, Workers United and SEIU Illinois rallied workers outside the Des Plaines factory and were joined by Illinois Treasurer Alexi Giannoulias, who threatened to sever the state's business relationship with Wells Fargo if the company was ultimately liquidated. The following day, Giannoulias appeared on CNN to discuss the issue:
Several days later, Giannoulias, Hare, and numerous labor leaders once again joined the employees in the Des Plaines factory cafeteria, where the workforce voted to occupy the plant if liquidation looked imminent. This brief documentary (produced for Workers United and the SEIU Illinois State Council by Heather Stone) covers both the May 7 and May 11 events:
Emerisque Steps Up (5/20-5/28)
On May 20, news surfaced that one of the original bidders, London-based private equity firm Emerisque, had resubmitted a substantial offer to purchase the company. At another rally outside of the Des Plaines plant, Workers United Midwest Treasurer Joe Costigan had this response: "We're heartened by the positive news today. But we're also circumspect because we don't believe that the banks have changed their irrational and malicious push to liquidate the company. So we're going to fight on."
The next move came in the form of a letter to Treasury Secretary Timothy Geithner drafted by Hare and Schakowsky and signed by over 40 members of Congress. Sent on May 21, it urged Geithner to help send a message to Wells Fargo that liquidating Hartmarx should not be an option. Read it in full below (click the button in the upper right hand corner to expand):
The Hartmarx board announced on May 22 that it had chosen Emerisque as the preferred bidder. The following week, Sen. Dick Durbin weighed in on the matter, siding with the Harmarx workers. "We loaned money to Wells Fargo and they need to help out local businesses," he said. "It's a two-way street."
On May 28, a group of employees at the company's Des Plaines plant traveled to Milwaukee to protest outside the Target Corporation Annual Meeting. Target’s Board of Directors includes Richard M. Kovacevich, chairman of Wells Fargo (who ultimately failed to show up). Below is another brief documentary from Heather Stone covering the trip:
Wells Fargo Lays Down The Gauntlet (5/29)
The following day, Wells Fargo and the broader lending group released a statement announcing their opposition to the Emerisque bid. They framed their position as in the best interest of the Hartmarx workers, asserting that Emerisque intended to close the company's Rock Island plant in the near term:
Emerisque’s offer requires selling significant pieces of Hartmarx soon after the acquisition, risking Hartmarx jobs at several U.S. factories and distribution centers. Specifically, Emerisque has committed to sell Hartmarx factories in Rock Island, Ill., and Cape Girardeau, Mo., and its distribution centers in Easton, Penn., and Rector, Ark., all within three months of the acquisition.
In a separate statement, Emerisque disputed the bank's claims:
The only factual component of the Wells Fargo statement today is that they believe they should realize a higher cash return on their claim.
There is a significant gap between their expectations and the reality of where asset valuations are in the current market. Hartmarx ran a sale process that has lasted almost four months before selecting Emerisque as the stalking horse bidder. The fact that the highest bid was selected after such a lengthy process surely tells its own story. The Emerisque bid is fully diligenced, and financing and ability to close are as certain as is possible at this stage of the process and in this environment. Any suggestion otherwise is simply not truthful.
Fruitful Negotiations (5/30-6/1)
Over the weekend, the talks continued -- this time at arms length, rather than via press release -- and a resolution was reached by the end of the bankruptcy court hearing on Monday, June 1.
Most importantly, Emerisque revised its cash offering from a numerical amount (the equivalent of around $56 million in the original bid) to a percentage of the debtor-in-possession (DIP) financing provided by the lending group to keep Hartmarx operating during the bankruptcy process. As one of the lawyers for Emerisque explained during the hearing, this is favorable to the creditors because it means "if the DIP goes up [in the coming weeks], the purchase price goes up."
An attorney representing the lending group estimated that, if the Emerisque bid is ultimately approved, this change will amount to $25 million more up front for his clients. He also mentioned the creditors' belief "that there is value in letting the bid go forward and keeping Hartmarx open."
Giannoulias described this event as "a great step forward for the hard-working, loyal, and committed workers of Hartmarx who have dedicated their lives to the success of this company."
"We like where we stand," Costigan remarked after the hearing. "But we have said throughout that we are going to remain vigilant. We are not out of the woods by any circumstance."
After a quiet few weeks, the parties returned to the courtroom for the bid hearing on June 24 and some concerns surfaced among the creditors. By the following day, however, those issues appeared to have been resolved as the lawyers filed to approve the sale to Emerisque. The Sun-Times reported that U.S. Bankruptcy Court Judge Bruce W. Black "addressed employees sitting in the courtroom by saying, 'It sounds like you have jobs to go back to and we’re all happy about that.' "
Hare released the following statement in response to the news:
“Today's approval of Emerisque's bid to buy Hart Schaffner Marx and the cooperation by Wells Fargo is good news for nearly 4,000 workers, their families, and our economy. It is proof positive that the voices of America's working men and women still do matter, even in an era of unprecedented greed.
“I would like to thank my partners in this effort without whom today would not be possible: Illinois State Treasurer Alexi Giannoulis, House Financial Services Chairman Barney Frank, Congresswoman Jan Schakowsky, Congresswoman Louise Slaughter, and Senator Chuck Schumer. Much credit is also due to Hartmarx’s employees and their representatives at Workers United.
“At a time when American manufacturing continues to go by the wayside, I am heartened by the success story of Hartmarx. And I am especially happy for the workers at my old Seaford Clothing plant in Rock Island who deserve nothing less.
On June 29, the workers celebrated at the Des Plaines factory with Hare, Schakowsky, Giannoulias, Balanoff, and other labor leaders. The following video produced by Heather Stone nicely recaps the event:
And on July 3, MSNBC's Ed Schultz devoted a segment of his show to the victory and discussed its importance with Hare:
Progress Illinois' full coverage:
5/4: Hartmarx And Wells Fargo: The Makings Of The Next Republic Windows?
5/5: Schakowsky Urges Wells Fargo CEO To Keep Hartmarx Running
5/6: "Our Jobs Are Worth Saving"
5/6: Vigil At Hartmarx Factory Begins Tomorrow
5/7: Hare: Keep Hartmarx In Business
5/7: Hartmarx Workers Will "Push To The End" To Keep Suitmaker Open
5/7: Giannoulias To Wells Fargo: Do The Right Thing
5/10: Hartmarx Protest To Continue On Monday
5/11: Hartmarx Workers Approve Potential Sit-In, Giannoulias Reaches Out To Other Treasurers
5/11: Wells Fargo Statement On Hartmarx
5/12: NY Times Covers The Hartmarx Fight
5/12: MSNBC's Maddow Covers Hartmarx
5/13: Great SEIU Video On The Hartmarx Fight
5/14: SEIU Launches "Keep America Working" Hotline
5/15: Hare: Obama Should "Weigh In" On Hartmarx
5/19: GritTV Highlights Hartmarx And Republic Windows
5/20: Workers Rally In Support Of New Hartmarx Bid
5/21: Hartmarx To Support Bid From British Firm
5/21: Over 40 Congressmen Ask Geithner For Help With Hartmarx
5/22: Wells Fargo Resisting British Company's Bid On Hartmarx
5/22: Hartmarx Officially Names Emerisque As "Stalking Horse" Bidder
5/28: Durbin Sides With Hartmarx: "It's A Two-Way Street"
5/29: Wells Fargo Officially Opposes Hartmarx Bid
5/29: Hartmarx Union Denies Wells Fargo Claims
6/1: Hare: "Monday We Go To War"
6/1: Hartmarx Workers Live To Fight Another Day
6/22: Final Deadline For Hartmarx Workers
6/25: Judge To Hartmarx Workers: "Sounds Like You Have Jobs To Go Back To"
6/29: Hartmarx Workers Celebrate In Des Plaines
6/30: Workers React To Hartmarx Victory
7/3: MSNBC's Ed Show Covers Hartmarx Victory
Full disclosure: Workers United is an affiliate of the Service Employees International Union. The SEIU Illinois State Council sponsors this website.