Malden files Ch. 11; gets financing

Marvin Lazaro, Staff Staff, December 10, 2001

Malden Mills, manufacturer of the Polartec family of products, has filed for Chapter 11 reorganization, while at the same time announcing it is receiving $20 million in funding from its lenders to continue operations.

The case was filed on Nov. 29 with the United States Bankruptcy Court, District of Massachusetts. The move had been anticipated by many as Malden Mills has suffered huge financial losses from the destruction of its main production facility in a Dec. 1995 fire, and from that facility's subsequent reconstruction. Although ceo Aaron Feuerstein received national recognition when he fulfilled plans to rebuild and continue paying employees during the construction process, the mill ultimately suffered from a sluggish retail market, the high costs associated with the rebuilding and the closure of the company's upholstery division.

In the home textiles manufacturing sector, Malden Mills is known for its production of Polartec fabrics for blankets. This fall the company introduced a wireless electric version of its Polartec blanket for Lands' End, which retails for $159 for a full to $219 for a king size.

"This reorganization allows Malden Mills to emerge from the challenges we have faced since the catastrophic fire that nearly destroyed our company in late 1995," Feuerstein said. "Today begins a new chapter in Malden Mills' 95-year history as a stronger, more highly focused and profitable company. Our internationally renowned brand name, our pioneering research and development arm, coupled with our strong customer base and our dedicated work force, will keep Malden Mills at the forefront of the industry for many years to come."

According to Richard Mikels, an attorney for Malden Mills, the company owes approximately $160 million to various creditors, chief among them the bank group of GE Capital Corporation, Special Value Investment Management and First Essex Bank, which is owed $140 million.

The bank group, however, is also financing the company's reorganization and is the lender of the $20 million in funding, which will be used for working capital.

Malden's next largest creditor is listed as Costco Wholesale in the amount of $3 million. Also listed among the company's list of top 20 creditors are The North Face, Eddie Bauer Inc., Patagonia and Lands' End.

Mikels also said Malden currently has no timetable as to when it will emerge from the reorganization.

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