Clothing Firm Would Emerge From Bankruptcy : Creditors Favorable to Maui & Sons Plan

A group of unsecured creditors of Maui & Sons--the bankrupt surf wear maker--agreed in concept Monday to a reorganization plan that would pay them 75 to 100 cents on the dollar over a period of one to three years.

“It looks like this is going to be a successful Chapter 11 (reorganization),” said Steven J. Kahn, a Century City attorney who represents the unsecured creditors committee. “It’s a real rarity to have a debtor propose (paying) 100 cents on the dollar.”

The plan, outlined to the committee at a Monday afternoon meeting, provides for unsecured creditors to receive 75% of what is owed them if the payment is made during the first year. If payment is made within two years, the creditors would receive 85%. And if repayment is in three years, the creditors would receive 100% of what Maui owes them, Kahn said.

$2.5 Million in Assets

The company’s unsecured debt totals about $3 million.

Maui & Sons filed for protection from creditors under Chapter 11 of federal bankruptcy laws in April, listing liabilities of $7.1 million and assets of $2.5 million.

Earlier this month, the bankruptcy court approved Maui’s agreement with its major secured creditor, Mitsui Manufacturers Bank, to slice Maui’s debt by about $600,000 to $2.8 million, with no further interest to be accumulated, if Maui makes monthly payments and repays the full amount by Dec. 15.

The company plans to quit manufacturing clothes as part of its effort to reorganize its debts. Instead, Maui intends to sell its current inventory of clothes by Dec. 15 and have new T-shirts, swim trunks and tank tops made and distributed by other companies under licensing agreements.

Quarterly Payments

“What the unsecured creditors committee wants is 100 cents on the dollar,” Kahn said. “If it’s going to take three years, it will take three years.”

Details of the plan still need to be worked out, Kahn said. For example, he said, he wants the payoff to be secured by personal assets of Maui’s principals, Jeff Yokoyama and Steve Prested. Additionally, the unsecured creditors want payments made quarterly.

“We’re hopeful we will work it out and all be paid off in full,” Kahn said.

Once details have been negotiated, the unsecured creditors committee will vote on the plan.