SKNL's American subsidiary files for bankruptcy

S Kumars Nationwide’s (SKNL) US subsidiary HMX

Acquisition Corp, which owns brands like Hart Shaffner Marx has filed for a voluntary petition for bankruptcy (under Chapter 11) on October 19, 2012. Interestingly, brands Hart Shaffner Marx have a hi-profile clientele as both President Barack Obama and Republican Presidential candidate Mitt Romney are seen in them. While SKNL umars took over the company in June 2009, to establish its presence in the North American market, HMX then filed for Chapter 11. HMX statement said that its existing lender had ratified and re-affirmed up to a $65 million (Rs 350 crores) credit facility.

The debtor-in-possession (DIP) facility provides immediate liquidity, while the company pursues alternatives to pay vendors for goods and services received after the filing. In addition, HMX is seeking customary authority from court to continue operating its business. HMX has also sought approval of the stalking horse bid with Authentic Brands Group. The Authentic Group will provide a long-term licence of HMX’s brands to a new entity which will continue to retain the HMX’s employees, operate the existing brands and manufacturing facilities.

A new management team was to revamp the business by revamping of its products/brands/closing down unviable operations, but the company under-performed due to continued and prolonged economic slowdown in the US. It clocked sales worth Rs 10.91 billion and a net loss of Rs 5 million for the last FY ended December 2011. For the quarter ended June 2012, the sales and net loss were Rs 2.88 billion and Rs 103.5 million respectively.

Keeping the ongoing sluggish market conditions and uncertain future for the HMX business in mind, coupled with tight liquidity conditions prevailing in the domestic market, SKNL has decided not to finance the additional capital requirement of $15 million (Rs 80 crores).