A New York manufacturer said Monday that it would continue running the stores and wholesale business of the Philadelphia-area children's apparel company Hartstrings L.L.C., despite the retailer's Chapter 7 bankruptcy-protection filing last week.
Parigi Enterprises L.L.C. purchased 23 of Hartstrings' store leases, its wholesale operation, and its trademark in April for $6.2 million as the retailer, based in Strafford, spread word that its assets were for sale, said Sion Betesh, executive vice president of licensing and marketing at parent company Parigi Group Ltd. Four stores, including one in Pittsburgh, were not acquired.
For Parigi, the acquisition of the higher-end children's apparel brand marked its first purchase of a company, Betesh said.
Hartstrings complements several other children's lines for which Parigi is a manufacturer and licensee, including Puma and DKNY, he said. Hartstrings' operations have continued without disruption.
"The aesthetic of the brand," Betesh explained, was attractive to Parigi. Hartstrings is "a classic, traditional brand for boys and girls," he said, "great occasion wear," and is distinctive from Parigi's other children's lines.
It has a "loyal following out there," he added.
The precise reasons for Hartstrings' financial disintegration remained unclear. Court documents and securities filings showed it was encumbered by millions of dollars in debt to its private-equity owner, American Capital Ltd., a publicly traded company based in Bethesda, Md.
American Capital bought Hartstrings nearly a decade ago, Betesh said, although he declined to discuss in detail what issues, beyond debt, had driven Hartstrings to the brink.
The company was founded in 1979 in the home of Peggy Hart Earle. In 2002, it was sold to the New York investment firm Keystone Holdings Inc. for an undisclosed price.
American Capital became involved the same year. Its annual report for 2002 showed that it held debt and stock in Hartstrings worth $21.6 million.
In the months leading up to the Hartstrings bankruptcy last week, several of the retailer's debt obligations to American Capital were set to mature. As of the date of its bankruptcy petition Thursday, Hartstrings owed the investment firm about $39 million in secured debt.
Messages left for American Capital on Friday and Monday were not returned.