Business

Frederick’s of Hollywood seeks Asian buyer

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It’s China or bust for Frederick’s of Hollywood.

The cash-strapped lingerie chain — scrambling to prop up sagging demand for its skimpy thongs, fishnets and teddies — has hired Singapore-based investment bank Auriga Investment to scout for a buyer in the Far East, The Post has learned.

The pitch is that Frederick’s, whose late founder Frederick Mellinger pioneered push-up bras and black panties in the 1950s, can be a potential powerhouse in China, the Middle East and other international markets, said a source briefed on the situation.

That’s despite the fact that New York-based Frederick’s has been steadily squeezed out of the US lingerie market since the 1990s by Victoria’s Secret — a division of Limited Brands that has cultivated a more tasteful and sophisticated image, hiring top supermodels to stage high-budget runway shows on TV.

Reached yesterday, Frederick’s executives declined to comment on the hiring of the investment bank or any plans to sell the company.

CEO Thomas Lynch said, however, that Frederick’s is poised to pump up skimpy sales and profits with improved lingerie designs and new products. “We’re expanding in bath and beauty this holiday season,” Lynch told The Post. “The restructuring has taken place and the turnaround begins now.”

Last week, Frederick’s disclosed it won a one-year extension to comply with covenants on a $7 million loan from Hilco Trading, despite the company’s ugly balance sheet and continued losses.

“We have full confidence in the company,” Richard Kaye, executive vice president at Hilco Trading, said in an interview yesterday. When asked what would happen if Frederick’s failed to meet its covenants one year from now, he said, “We are not going to speculate on what may or may not be the case one year from now.”

Still, some sources speculated that Hilco, whose brand-licensing division includes investments in Polaroid, Sharper Image and Halston, will eventually have its way with Frederick’s.

That’s partly because it will be difficult to find an Asia-based buyer for Frederick’s, which operates 124 stores in the US, said Richard Kestenbaum of Triangle Capital, a New York investment bank.

“In our experience, Chinese buyers are very interested in bringing good American brands to China through a joint partnership or a licensing deal,” Kestenbaum said. “They’re a lot less interested in owning assets in the US, a country they don’t understand — especially when the company is not making money.”

But while Frederick’s has been down-and-out at home for a while, it “might have a much freer rein in China,” says Saul Gitlin of Kang & Lee, an advertising agency focused on Asian consumer markets.

“China can represent a second wind for a brand that has been challenged elsewhere,” Gitlin said. “It’s all about the marketing.” jkosman@nypost.com