A federal judge could soon sign an order authorizing the liquidation of Heritage Sportswear (asi/60582), the 10^th largest supplier in the promotional products industry, according to a source with knowledge of the case.

The source said Thursday that U.S. District Judge Mark H. Cohen plans to review a revised proposed order to liquidate. The motion was submitted the week of April 14th by attorneys representing Heritage’s court-appointed “receiver,” a kind of financial overseer who has made the motion to wind down the supplier’s operations and sell-off its assets through third-party liquidation specialists Hilco Merchant Resources.

While engaged with another court hearing Thursday, Cohen is likely to sign the order to liquidate Heritage “quickly” once he has a chance to review it, according to the source. “He’s been waiting for the revised order,” the source said.

A hearing on the motion to liquidate Heritage occurred April 15th before Cohen in the U.S. District Court for the Northern District of Georgia, Atlanta Division.

The 50-minute-long proceeding concluded with Cohen ordering Heritage’s receiver to submit a revised proposed order to liquidate. Attorneys for Gene R. Kohut, the receiver, submitted the revised order April 17th, online court records show.

Among other details, the revised motion addresses concerns from Top 40 supplier Gildan (asi/56842).

Gildan recently filed a counter motion opposing Heritage’s liquidation.. It wasn’t that Gildan was trying to save Heritage; rather the Montreal-based firm was trying to protect its interests. Gildan asserted that Kohut’s initial proposed order to liquidate Heritage violates an earlier court-backed agreement because it would allow a third-party company to sell off Gildan inventory – without Gildan’s permission – as part of the proposed cashing in on Heritage’s assets. Heritage, a wholesaler of Gildan apparel to the promotional products industry, had the Gildan inventory under consignment agreements.

As an apparent possible compromise, Kohut’s revised proposal states that once the liquidation is complete he, as receiver, will disperse all collateral proceeds to the plaintiff named in his motion – Atlanta, GA-based Cadence Bank – except for proceeds related to Gildan inventory. He’ll only release that money once ordered by the court – or if both Gildan and Cadence, which dispute the scope of what constitutes Gildan inventory, come to an agreement over how to handle things.

Like the original order, the proposed revised order also asks the court’s permission to roll-up Heritage’s operations and liquidate its assets, with Hilco appointed as the liquidating entity.

Court papers provide insight into the downward descent that has landed Heritage on the brink of liquidation. While documents state that Heritage continues to operate and fulfill orders, the firm is apparently bleeding cash. “The receivership estate is rapidly losing money at the rate of approximately $500,000 per week,” court documents filed by Cadence attorneys state. “In order to reduce these enormous expenses, the assets must be sold quickly as requested by the receiver.”

In 2018, Heritage engaged investment firm SSG Capital Services amid financial struggles that left the supplier unable to meet obligations to creditors, court papers indicate. SSG contacted 107 different entities that could possibly invest in the supplier to make it viable, court papers relate. That included 28 financial buyers with existing interest in the imprinted apparel industry and 22 parties that could present refinance options. Of all those, only one entity – Top 40 supplier TSC Apparel (asi/90518) – submitted a letter of intent for the acquisition of Heritage’s assets. Nonetheless: “Ultimately, TSC, Heritage and Heritage’s lenders were unable to reach an agreement,” court papers state.

Founded in 1982, Heritage employs about 350 people across five locations in Ohio, Virginia, Indiana and Florida, according to court documents. The company, which sells everything from polos and T-shirts, to outerwear, headwear and more, generated revenue of approximately $150 million in 2018, according to court documents. 

For 2017, Heritage reported flat industry sales of $141.6 million due to what it characterized as “market conditions.” In 2013, the firm acquired former Top 40 supplier Virginia T’s, but has since dropped the Virginia T’s branding.