Judge OKs Plan for Maui and Sons’ Reorganization

A federal bankruptcy judge cleared the way Tuesday for a plan that would allow Maui and Sons, a major surf-wear manufacturer known for its logo featuring a shark wearing sunglasses, to emerge from bankruptcy.

Under the plan, Maui and Sons would license its surf-wear label to other companies and would no longer manufacture the clothes itself, said William N. Lobel, an Irvine attorney representing Maui and Sons.

On Tuesday, U.S. Bankruptcy Judge John Ryan in Santa Ana approved a draft of a disclosure statement that will be sent to a committee of Maui and Sons’ unsecured creditors.

“We have an agreement with the (unsecured) creditors’ committee that they have approved the plan and are sending a letter to the creditors saying . . . they believe the plan is in their best interests,” Lobel said. He said he expects Ryan to approve a final reorganization plan in June.

Under the plan, Maui and Sons’ unsecured creditors will receive at least 68% of the more than $2.1 million that they are owed. The firm has paid $2.8 million to clear its debt with Mitsui Manufacturers Bank, its one secured creditor, Lobel said.

Maui and Sons filed for a Chapter 11 bankruptcy reorganization in April, 1988, at a time when the $1-billion-a-year surf-wear industry was flooded with competitors. At the time, analysts faulted Maui and Sons for diversifying out of its mainstay of surf wear and into other types of sportswear.

Steve Prested, a company co-founder, said the firm has begun to get back on its feet by focusing on its surf wear products. Prested and his former partner, Jeff Yokoyama, founded the firm in 1981 by investing $3,500 to buy madras cloth to make drawstring shorts.

“The shark is back. Definitely. No question about it,” Prested said.