Sale OK'd, the waiting begins

Brent Felgner, October 13, 2003

The watching and waiting for the reincarnation of Pillowtex's brands and, to a much lesser degree, its other assets, has begun in earnest.

GGST LLC, the liquidation joint venture that posted the winning $128 million bid ending the Oct. 2 asset auction, will close the deal within the next three weeks, the mill said, following last week's approval of the outcome by a federal bankruptcy court in Delaware.

Undeniably, the brands — specifically, Royal Velvet, Charisma, Fieldcrest and Cannon — remain the true prizes of the liquidation, even in their atrophied and devalued states, a status conferred upon them by virtually every observer and participant in the bankruptcy and auction.

But their final destinations, as owned or licensed properties, apparently remain the subject of continuing secret negotiations and, at times, outlandish speculation. Every conceivable scenario seems to have emerged, including some fairly tortured strategies placing them as the linchpin in turning around more than a couple of national retailers — a super power they never exhibited even in their glory days.

But the speculation can be irresistible. Unsuccessful at the auction, Sears and Broome & Wellington nonetheless had their attorneys present in the courtroom last week for the sale approval. While Broome & Wellington may have been there for another purpose, Sears' appearance had no obvious or stated intent.

All that may be said with even slight certainty at this point is that GGST has stated, through rare public utterances and in court papers, that it does not intend to operate any portion of Pillowtex as an ongoing business. GGST, the original stalking horse bidder, brought in Group 3 Design to manage the brands' marketing and rebirth and, hopefully, return to their penultimate revered stature. And although there was a brief moment when it seemed some announcement might be forthcoming, repeated calls to Group 3 went unreturned.

Final ratification of the sale came during an Oct. 7 hearing in Wilmington, DE. Chief bankruptcy court judge Peter Walsh approved the result after more than a dozen objections — most narrow in scope or intended to create a record — were withdrawn, resolved or set aside.

Walsh's ruling also came after a somewhat lengthy and, at moments, contentious "clarification" was sought on behalf of the second place bidders, another consortium led by PT Partners and The Petters Company.

PT attorney Paul Traub, of New York, questioned whether the auction was conducted within court-sanctions guidelines and whether the outcome was fair. His concern centered on the role of Franco Mfg. as a latecomer to the GGST consortium and participant in the auction.

GGST was originally comprised of four companies: Gordon Brothers Retail Partners, Gibbs International, SB Capital Group (Schottenstein) and Tiger Capital. But on auction day, several participants, including representatives of the creditors' committee, placed Franco alongside and caucusing with GGST.

Reading from a report published Friday, Oct. 3 in HTT Extra, the daily e-news supplement, Traub questioned whether Franco's presence was proper and whether it gave GGST an unfair advantage in the bidding, which ended with the two groups just $500,000 apart.

Moreover, Traub complained that the PT group was forbidden from discussing the possibility of making its own joint bid with Broome & Wellington during the auction, which might have been able to overcome the GGST offer.

"We were told not to make that disclosure [of the request] on the record," Traub stated.

"I don't know what conversations Broome & Wellington and the PT group had with each other, but that is of much more interest to me," Wiles shot back. He went on to mention that Hilco, another bidder, had made a request to talk with Sears, which was also refused.

Franco was brought to the GGST table following the Sept. 29 bid deadline after it failed to qualify as a bidder, a move that was proper under the guidelines, said Pillowtex attorney Michael Wiles and Mark Power, attorney for the creditors' committee.

Walsh found that Franco's involvement did not violate the bidding rules and that the auction was conducted fairly. Several minutes later he approved the sale.

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