Tropical Sportswear gets objections from creditors' committee

By Jeff Pines

Washington, Jan. 10 - Tropical Sportswear International Corp.'s creditors' committee objected to the proposed bidding procedures for the company's assets and final approval for its debtor-in-possession financing.

The objection was filed with the U.S. Bankruptcy Court for the Middle District of Florida Friday.

Perry Ellis International Inc. has offered to pay $85 million for the Tampa-based clothing designer and marketer.

But the committee said it was only formed recently and so its professionals have not had much time to review the asset sale agreement. The creditors added that there may be alternatives such as a stand-alone reorganization that would give them a better deal.

As written, the committee believes the bidding procedures will discourage competition for the company's assets.

For example, potential bidders will have only about 30 days to consider bidding. The committee wants the period before the final hearing extended to 75 days after the auction notice is mailed. As written, the procedures call for a final sale hearing 45 days after the hearing to approve the procedures.

Another issue is that the procedures enable the company alone to determine qualified bidders. Since the auction is for the benefit of the unsecured creditors, the committee said it believes it should share in determining who is qualified to compete.

The committee believes the $2.8 million break-up fee should another bidder beat Perry Ellis is too high.

The $500,000 increment for bids is too bid; instead the committee wants subsequent bids to increase by $200,000.

In a separate Friday filing, the committee objected to final approval of Tropical's $50 million DIP financing saying the company has failed to show a need for the financing.

If the court does approve the financing as written, the creditors' committee said it will give the DIP lenders, The CIT Group/Commercial Services Inc. and Fleet Capital Corp., an unfair amount of control over how the bankruptcy case proceeds.

For example, the DIP agreement matures in 120 days from the petition date. If the company fails to close the sale of its assets by that date, it would be in default, the committee said.

A Wednesday hearing is scheduled.

Tropical filed for bankruptcy on Dec. 16, 2004. Its Chapter 11 case number is 04-24134.

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