A private investment firm agreed April 7 to buy most of the assets of bankrupt Foss Manufacturing, which could keep the Hampton-based fabric manufacturer open with its current employees.

But it also sets the stage for a legal effort – blessed by a federal bankruptcy court judge in Manchester a day earlier — to recover money from officials of the bankrupt firm, including former CEO Stephen Foss, who have been accused of using the company for their own personal gain.

Alinian Capital Group LLC, an investment firm based in Fort Lauderdale, Fla., agreed to pay roughly $39 million for the company.

If Alinian is not outbid at a planned April 25 bankruptcy auction, and if the deal is approved by a bankruptcy court judge three days later, the sale should close before May 15, according to the bankruptcy filing.

Alinian agreed to keep on 90 percent of the firm's 355 workers for at least a year, but it has no intention of laying anyone off, and "hopes to expand the workforce beyond that," said Stephen Weiss, a New York attorney representing Alinian.

A sale of assets will mean that major secured creditors will be paid off, leaving the bankrupt estate with $300,000, some of which will go to "winding-down" costs. That leaves virtually nothing for a pension shortfall that runs in the millions or for unsecured creditors owed more than $15 million.

The federal Pension Benefit Guaranty Corp. should take care of the pension shortfall, said Harold B. Murphy, an attorney for the bankruptcy trustee currently running the corporation, leaving the PBGC as one more secured creditor.

The official creditors committee, in cooperation with the bankruptcy trustee, plans to file a lawsuit against Stephen Foss, and other former executives and third parties, seeking a return of money they allegedly looted from the company.

On April 6, Bankruptcy Court Judge Michael Deasy signed an order permitting the suit, but it is unclear when it will be filed.

"Discovery is continuing," said Joe Foster, a Nashua attorney who represents the creditors committee.

Foss, which makes nonwoven industrial fabrics, filed for Chapter 11 reorganization on Sept. 16. CEO Foss resigned shortly afterward, but many members of the board and other company executives who were friends and relatives of Foss stayed on, despite allowing "such malfeasance to continue under their noses," charged CapitalSource Finance LLC, the company's main creditor last fall.

Foss objected to the charges, arguing that the allegations were false, a distraction to the company and in preparation for a lawsuit.

Several months ago, the trustee began to market the company – approaching some 90 possible purchasers. More than 50 signed confidentiality agreements, 10 toured the plant and "several" made offers. The trustee chose Alinian, a firm which – according to its Web site – has raised over $1 billion in debt and equity financing mainly, for mid-sized businesses. It has helped finance or purchase several firms out of bankruptcy, including Penthouse magazine.

It also has helped finance NucSafe, a radiation monitoring firm and a Brazilian luxury hotel.

Managing partners include James Morrell, executive vice president of Granite Associates Inc., AJ Nassar, who formerly was CEO of a textile manufacturing group serving the home furnishings and flooring industry (and who served as financial co-chairman for the failed presidential campaign by former U.S. Sen. and former Education Secretary Lamar Alexander) and Frank Cougentakis, who has interests in a large contracting firm in the New York city area.

Weiss said that Alinian has worked with CapitalSource Finance LLC before, and that's how they may have become interested in the deal. But two major conditions had to be worked out before a deal could be struck.

First Coastal Economic Development Corporation and the New Hampshire Business Finance Authority had to continue to subordinate their $5 million loan to Foss to CapitalSource, and Foss (NH) QRS 16-3 Inc., which owns the property, had to agree to modify its lease.

On April 10, the bankruptcy court approved the timing of the sale and scheduled a hearing on the sale for April 28.