The future of Top 40 supplier Heritage Sportswear (asi/60582) could hinge on a planned hearing in federal district court in Georgia.

This week, U.S. District Judge Mark H. Cohen scheduled a hearing on a motion to wind down Heritage’s operations and to liquidate its assets. The hearing is set to take place on Monday April 15^th in the U.S. District Court for the Northern District of Georgia, Atlanta Division.

Gene R. Kohut, of financial firm Conway MacKenzie, Inc., filed the motion, which relatedly asks the court to allow a third-party company – Hilco Merchant Resources – to ultimately proceed with a sell-off of Heritage’s assets.

Heritage Sportswear did not comment on whether or not it plans to contest the motion, the granting of which could effectively lead to the shuttering of the business.

It’s unclear exactly how things will play out. Still, if the judge grants the motion as requested, the receiver could have an official green light to begin the wrapping up of Heritage’s business in anticipation of the liquidation. Court papers indicate that most of the collateral proceeds from a liquidation would be distributed to the plaintiff named in the motion – Atlanta, GA-based Cadence Bank.

Amid Heritage’s recent financial difficulty, Kohut became the company’s court-appointed receiver. In that role, Kohut continued Heritage’s business operations, but “given Heritage’s continuing losses, lack of ability to find adequate financing, and lack of a viable way to turnaround or sell its business,” he determined that it is in the best interest of the receivership estate and its creditors to liquidate the supplier firm, according to court documents. Attempts to sell Heritage have failed, the documents noted.

Sources close to the situation told Counselor that Heritage is continuing to operate, which includes receiving orders, billing and collecting. Sources, which spoke on condition of anonymity, have previously said that Heritage is in ongoing negotiations with multiple entities. The talks could lead to investment that would allow the supplier to continue as a viable business, sources said. Still, there was not elaboration on whether or not those entities are from within or outside the promotional products industry. Sources said that Heritage has not entered into the liquidation process and does not have a timeline for doing so.

As Counselor reported last week, the potential closure of Heritage – the industry’s 10^th largest supplier by revenue – has had a ripple effect in the promo market. Montreal-based Top 40 supplier Gildan (asi/56842) said that it expects to incur a $19 million to $23 million charge during the first quarter as a result of Heritage being liquidated. Heritage is one of a number of suppliers that sells Gildan apparel to the promo sector. Publicly-traded Gildan said the Heritage-related charge won’t impact top line revenue, but will reduce diluted earnings per share for the first quarter from a previously anticipated $0.24 to $0.26 to a range of $0.14 to $0.16. 

Court papers indicate that Gildan could be opposed to the liquidation of Heritage Sportswear. In his order, U.S. District Judge Cohen instructed Gildan to file any response opposing Kohut’s liquidation motion by April 11. Garry Bell, vice president of corporate marketing and communications at Gildan, told Counselor that the firm couldn’t offer more insight at this time because the court case is ongoing.

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, ranks 10^th on Counselor’s latest list of the largest suppliers as determined by North American promotional product revenue.

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.