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Polymer Group defaults on loan payments

Debt problems hammered another struggling textiles player last week when Polymer Group Inc., a producer of special non-wovens, said it was in default on a senior credit facility and its lenders exercised their right to block bond payments.

The company said it is in compliance with payments under its credit pact but is technically in default of a covenant waiver that kept it out of default in April, but which expired Dec. 29.

Bank lenders have already exercised their right to block an interest payment of $17.8 million scheduled to be made on Jan. 2.

The textiles producer said the default was triggered when it exceeded its maximum allowable ratio of debt to EBITDA (earnings before interest, taxes, depreciation and amortization) for the latest four quarters.

Polymer Group produces a wide range of non-woven specialty fabrics used in consumer and industrial products, including Miratec, a fabric it claims could someday replace traditionally woven and knit textiles in a wide range of uses. Polymer had earlier joined forces with textiles giant WestPoint Stevens to develop home fashion uses for Miratec.

At road shows for Wall Street analysts, Polymer Group has in the past shown prototype samples of high-tech, non-woven cottons that it hopes may someday be used in bedding products, including sheeting. Other Polymer non-woven fabrics are used in such consumer products as disposable diapers.

Polymer Group said it has sufficient liquidity to meet its current obligations and has sufficient cash and short-term investments to be able to operate its business normally. The company said it expects to maintain existing payment terms and remain current with all of its suppliers.

The company said it has $45 million in cash and short-term investments and has entered into a forbearance agreement preventing banks from taking further action against it until March 29. But that agreement could be terminated if the company fails to complete a financial restructuring. The company said it has hired the investment banking firm of Dresdner Kleinwort Wasserstein to help it explore restructuring options.

The non-wovens producer, with 25 plants around the world, employs about 4,000 workers.

Polymer Group stock, listed on the New York Stock exchange, was trading after the news of the default at $0.59 a share, down 92.3 percent from a 52-week high of $7.68.

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