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Pillowtex payment deadline extended

Kannapolis, NC — Throwing imperiled Pillowtex another — but short — lifeline, the company's banks have given the textiles producer an additional four days, until Monday, July 14, to come up with some cash or to find a white knight, the company announced this morning.

After Pillowtex — the nation's third-largest home fashions supplier — missed a June 30 payment for both principal and interest due on its debt, lenders cut the company some slack and agreed not to call the loans, or take action to recover on them, through today. With the deadline only hours away, the banks gave the company through the weekend to put some kind of deal together to stave off another bankruptcy, the second in as many years, and the very real threat of liquidation.

In addition to missing the June 30 payment, Pillowtex earlier told creditors that "it did not believe that it would be able to comply with the interest coverage ratio and leverage ratio covenants contained in the term-loan agreement for the fiscal quarter ended June 28, 2003." That sent out a signal that the company is running short of cash and is likely generating an operating loss.

Trying to hoard its dwindling cash reserves, the company continues to furlough its blue-collar workers, keeping its plants on an extended shutdown this week following its regular two-week summer vacation closing.

The company said it's still trying to come up with some solution to its problems, "and is continuing to work with its term loan and revolving loan lenders in reviewing its strategic alternatives."

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