September 23, 2002-- Home Textiles Today,
Guilford prepares for exit from bankruptcy
Clearing the way for Guilford Mills Inc. of Greensboro, NC, to emerge from Chapter 11 by the end of the month, creditors and shareholders have voted overwhelmingly to accept the textiles producer's plan of reorganization, and a U.S. bankruptcy court has given the plan the green light, removing the last hurdle in the company's comeback.
Guilford's exit from bankruptcy, which could take place by Sept. 30, marks something of a speed record for a textiles industry bankruptcy. The company filed its pre-packaged plan only six months ago, on March 13, following a painful restructuring in which the company shut down plants and laid off workers as part of a sweeping overhaul of operations. As part of the restructuring, Guilford sold most of the assets of its Guilford Home Fashions unit to Homestead Fabrics Ltd., including brands and licenses.
"After nearly two years of restructuring and six months of financial reorganization, we have Guilford positioned exactly where we've wanted all along," said John Emrich, president and ceo. "I'm thrilled with the way this company has performed these past six months."
Under the terms of the reorganization, Guilford's suppliers will be paid in full, the company emphasized.
Under a debt-for-equity swap typical of such a bankruptcy restructuring, Guilford's senior lenders will now own most of the company, with a 90 percent stock position. Existing shareholders will own the remaining 10 percent.
Senior debt, which will consist primarily of a three-year revolving credit facility and a three-year term loan, will total about $145 million — down from a $270 million debt load that swallowed up the company's cash before entering bankruptcy.
"When we started this process," said Emrich, "we said we would complete the reorganization relatively quickly. We said we would pay our trade creditors in full — an unusual step in a bankruptcy case like this. And we said we would continue to serve our customers without any interruptions. We delivered on everything we said we were going to do."
LNT rating lowered by Merrill Lynch
Wall Street powerhouse Merrill Lynch has lowered its rating on Linens 'n Things to "neutral" from an earlier "buy," concerned that sales may not be growing as fast as expected.
In a research note, Merrill said, "While we continue to believe the company's turnaround is moving in the right direction, we are increasingly concerned about LNT sales acceleration in a changing retail environment."
Merrill lowered its projections for same-store sales growth for both the third and fourth quarters and now expects same-store sales to be flat, down from a previous forecast for growth of up to 3 percent.
Pillowtex investor wants board member
Oaktree Capital Management, a major investor in Pillowtex Corp., said it wants to place one of its vice presidents on the textiles producer's new board of directors.
Since emerging from Chapter 11 earlier this year, Pillowtex has been trying to assemble a new board.
Oaktree owns about 3.8 million shares of Pillowtex stock, about a 20.1 percent stake.
According to a filing with the Securities and Exchange Commission, an interim Pillowtex director, Oaktree officer Mariusz Mazurek, told the company he wants to step down. Oaktree, in turn, said it wants to name Scott Graves to succeed him. So far, three Oaktree officers have been named to the Pillowtex board on an interim basis: Mazurek, Bruce Karsh and Ken Liang.
A number of high-profile textiles industry veterans have been approached to take a spot on the Pillowtex board but have declined, and Pillowtex has hired an executive search firm to identify potential directors to serve on a permanent basis.
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