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The Honolulu Advertiser
Posted on: Tuesday, June 30, 2009

Judge keeps 2 Hilo Hattie offers in play


By Rick Daysog
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

A bankruptcy court judge yesterday let the last-minute sale of Hilo Hattie's stock to Royal Hawaiian Creations stand. Honolulu-based Royal is the largest unsecured creditor in the Hilo Hattie bankruptcy.

Photos by KENT NISHIMURA | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser

Patty Davila of McAllen, Texas, looks at a jewelry display in the Hilo Hattie store at Ala Moana shopping center. Hilo Hattie filed for bankruptcy in October 2008.

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A federal judge kept alive two competing offers to bring retailer Hilo Hattie out of bankruptcy.

U.S. Bankruptcy Judge Robert Faris let stand the last-minute sale of Hilo Hattie's stock to local clothing manufacturer Royal Hawaiian Creations and set a July 15 hearing date on the disclosures for the company's reorganization plan.

Faris also took no action on a separate offer by Maui Divers of Hawaii, whose offer is backed by vendors and other unsecured creditors.

"My obligation is to leave them both up there," said Faris.

Honolulu-based Royal Hawaiian is the largest unsecured creditor in the Hilo Hattie bankruptcy, with a claim of $798,000, largely for unpaid merchandise. Royal Hawaiian is offering to invest $3 million in Hilo Hattie and keep the retailer operating.

Maui Divers, which operates jewelry concessions inside Hilo Hattie's seven stores, is owed $1.3 million. It is offering $1 million, which will be used to repay the company's secured creditors, including banks and landlords.

Both proposals promise to keep Hilo Hattie's roughly 200 employees working, and continue business with do- zens of vendors.

Dubbed the "Store of Hawai'i," Hilo Hattie filed for bankruptcy protection in October 2008.

Founded in 1963 on Kaua'i by Jim Romig, Hilo Hattie began as Kaluna Hawaii Sportswear out of a grass shack between Lihu'e and Kapa'a that became a popular stop for tour operators.

The retailer adopted the Hilo Hattie name in 1979 when Romig bought the rights to the stage moniker of famous comic hula dancer Clara Haili as part of the acquisition of a Hilo clothing manufacturer and retailer.