Venerable After Six, once a Philadelphia institution with its elegant tuxedos, is unraveling.
Behind its once-stylish corporate image is an interwoven tale of crushing junk-bond debt, shifting worldwide economic currents and - according to some - mismanagement by its executives.
To the workers, After Six symbolizes the corporate wreckage of the 1980s, a company done in by the debt excesses and the greed of that decade. They fear that After Six is about to become another hole in the economic fabric of Philadelphia, which 30 years ago was the capital of the men's apparel industry.
To the company and its investors, After Six is a dinosaur in a dying industry, a company that cannot stand up to global competition.
After Six executives blame the company's woes on declining sales due to the recession, fewer young men coming of rental-tux age and competition from nonunion labor. As with many industries, formal-wear makers are unable to compete with goods from overseas, where workers often earn a fraction of U.S. union wages.
Yet current company managers acknowledge that After Six's financial problems were accelerated by a 1984 leveraged buyout orchestrated by Drexel Burnham Lambert, the Wall Street investment firm that collapsed after junk bond and insider trading scandals grounded its financial star, Michael Milken.
After Six now stands at the brink of sale, or outright liquidation. Either way, the company could likely vanish, leaving workers like Panichelli and Munson jobless.
"This company, it's been in here 89 years - that's a long time. This is an institution," said John Fox, manager of the Philadelphia joint board of the Amalgamated Clothing and Textile Workers, who was married in an After Six tuxedo. "This is not just a company that goes broke one night and everybody
forgets about it the next day."
The company's problems were made public in late July. As the workers began their annual two-week vacation, the owners of After Six announced they would close the company's Philadelphia plant and sell its assets to a Baltimore investor, Charles Ezrine. Ezrine said he would take at least some of the work overseas.
The sale is off for now, blocked first by a union injunction request and now delayed by talks between the company and the union. But with $28 million in losses over the last five years, the hour is late for After Six.
After Six was founded in 1903 as a suit and overcoat business by Samuel Rudofker, an immigrant from Ukraine who cut coats in his rowhouse at Fifth and Pine Streets.
His sons, Max and Morris, later took over and in 1923 began making a mass- produced tuxedo. It cost $16.50 and was known as the Rudotux.
"It began selling like crazy and that was it. We were in the tuxedo business," said Samuel Rudofker, Max Rudofker's son, and chairman of After Six from 1954 to 1980.
In 1938 Morris and Max Rudofker decided to change the name of the company
from S. Rudofker & Sons. They were brainstorming with some New York ad executives and the meeting went past sunset. Max exclaimed that he had to go; it was after 6 p.m.
"When he said that they all realized that was the name - After Six," said Samuel Rudofker.
The Rudofkers pioneered the tuxedo for the masses, a fashionable, yet sturdy, garment tailored for rental houses. The After Six tux could stand up to school dances and weddings and subsequent cleanings, and spawned the rental formal-wear industry.
In the late 1960s Samuel Rudofker began to diversify After Six and took the company public to finance it. Its ticker symbol was TUX.
Meanwhile, Morris' son, Robert, had joined the company, but the two cousins disagreed over the diversification plan. Robert Rudofker said the new businesses were not as profitable as the core formal-wear operations.
In 1980, Robert Rudofker threatened a proxy fight and took control of the board. Samuel Rudofker resigned and the family remains divided.
Robert Rudofker found an ally in Bernard Korman, a well-known Philadelphia investor. A lawyer by training, Korman is chairman of Mediq Inc., a medical supply and services company, and has a long history of buying and selling companies. Korman joined the After Six board in 1980.
From 1981 to 1984 the company returned to profitability. Then, in 1984, Drexel took it private in a $25 million leveraged buyout.Drexel got stock in the company and sold its junk bonds - bonds rated at lower than investment grade - at interest rates of more than 12 percent.
Many of the buyers were regular Drexel clients, including Executive Life Insurance Co., the now-defunct California insurer that had invested much of its portfolio in junk bonds.
The day before After Six hurriedly announced the buyout its stock trading volume mysteriously rose to 33 times its average.
Drexel also earned nearly $1 million in fees for arranging the bond sale. It would have been paid $2 million had the buyout fallen through. Later, when the company was in trouble, After Six hired an investment banker to try to sell it. It hired Drexel.
In 1986, After Six sold its factory at 22d and Market to a California real estate developer for more than $10 million and moved to its current plant, a former Keebler bakery.
The factory is owned by a real estate partnership made up of Robert Rudofker, Korman and a small group of investors, including former Drexel executives, After Six managers and some Philadelphia lawyers, including Bruce Kauffman, the former Pennsylvania Supreme Court justice. Kauffman is now chairman of Dilworth, Paxson, Kalish & Kauffman, the Philadelphia law firm.
The partnership took out a $6.3 million low-interest mortgage, which was financed by Philadelphia National Bank and the Philadelphia Industrial Development Corp., the city's economic development agency. Loan documents state the property cost $3.5 million. The rest of the money was to finance renovations and equipment.
The partnership then leased the building to After Six for more than $1 million a year, a handsome return on the partners' investment.
John Saler, a great-grandson of After Six founder Samuel Rudofker who bid unsuccessfully for the company in 1989, criticized how it was managed during this period, including the fees paid to Drexel and the factory lease arrangement.
Board members Korman and Robert Rudofker said they would not comment on After Six until the company's fate is resolved.
In 1990, after the company missed its bond payments, it underwent a
financial restructuring. Robert Rudofker was removed as chief executive. Later, its current chairman, Victor Ameye Jr., was installed. The bondholders agreed to defer their interest payments until this year.
"The bondholders feel the company certainly was mismanaged prior to the time that Mr. Ameye arrived," said Joseph Radecki, who represents most of After Six's bondholders.
But Radecki said the alleged mismanagement and the company's high-debt structure - while troubling - were not the fatal blow. He said in the last two years, while the bondholders deferred payments, the company has suffered operating losses.
Now, he said, After Six cannot compete with other manufacturers producing at nonunion factories in the South and a few who have begun to import tuxedos
Nancy Panichelli and Esther Munson have felt the company slipping through their hands. Last year, they used to work on 400 coats a day. This year it has dwindled to fewer than 300 between them. They've begun trading off their hours, so both will at least have some work.
Last week, company officials said they would keep 100 to 200 jobs in Philadelphia if the workers agreed to allow the company to import some tuxedos, including the After Six line.
The union said it would rather the company close than set a precedent for other garment manufacturers.
"I'd sooner see the whole thing go down than have it go overseas," said Panichelli. "It's really the same thing."
Radecki has threatened to liquidate the company. Under a liquidation, he said, the company's creditors, including the union's pension fund, would receive less than they would from a sale.
But the union says it will not back down.
"If you're going to liquidate, liquidate already," said John Fox, the local union leader. "I'm getting tired of being threatened constantly."
Fox said that if the company is liquidated someone may buy the name who would keep the operation in Philadelphia.
Paul Greenwald, who writes a newsletter for the formal-wear industry, said After Six is probably beyond salvaging. He said After Six's management was too distracted by the buyout in the mid-1980s and lost its place in the market.
Now, he said, competitors have gained too much ground on it.
Radecki said the company is mulling its options. But, he said, the company is running out of time.
"These sorts of things usually get worse before they get better," he said.
Nancy Panichelli is bracing for the worse. At 60, she had expected to end her working days at After Six.
"For 41 years I've been here," she said. "Now, any day now I'll come in for work and find the door locked."