Judge approves sale of flagship Hilo Hattie store lease

Hilo Hattie is a big step closer to reorganizing its debts after a U.S. Bankruptcy Court judge confirmed a deal Monday for the local retailer to sell the lease on its flagship store, though the future of the store in Iwilei remains unclear.

Bankruptcy Judge Robert Faris confirmed a $5.1 million deal for the store’s landlord to buy back the lease.

Under terms of the sale, Honolulu Ltd. will pay Hilo Hattie about $4.1 million. Another $1 million will go towards unpaid rent the retailer owes the landlord, which is an affiliate of the Harry & Jeanette Weinberg Foundation. The foundation is owed $2.5 million in back rent, and is foregoing $1.5 million of that debt.

Jim Wagner, an attorney representing the retailer, said it is expected that about $3 million will be available to creditors after closing costs, administrative fees and moving expenses are paid out of proceeds.

Hilo Hattie filed for Chapter 11 bankruptcy in February, listing $8.1 million in assets and $13.2 million in debts.

Wagner said Hilo Hattie will move out of at least most of the Iwilei space before the end of the year, though it’s not yet determined whether retail operations will cease on the property.

Hilo Hattie uses only 33,000 square feet of the 87,000-square-foot building on Nimitz Highway for retail sales. Much of the balance once housed manufacturing operations that were outsourced several years ago.

The retailer, which also has stores at Ala Moana Center and on Maui and Kauai, is expected to file a plan for settling debts and continuing in business by Sept. 19.