WestPoint stock takes major hit

Don Hogsett, June 18, 2001

Just when it looked like things were finally turning up for WestPoint Stevens — it made a $39 million bond payment Friday and is on the cusp of completing a new debt offering that could bring in as much as $150 million in cash — stock in the major mill was shredded last Friday morning after a strongly worded 'sell' report from Wall Street analyst Kay Norwood of Wachovia Securities here.

WestPoint's stock plunged by more than 42 percent in exceptionally heavy volume Friday morning, falling as low as $1.52 a share from Thursday's close of $2.65. At its Friday morning nadir, WestPoint stock was off more than 89 percent from its 52-week high of $14.31 recorded last September. WestPoint stock has now skidded down by more than 95 percent from a high of almost $38 recorded two years ago.

The deep slide was triggered by a highly unusual "sell" rating placed on the major mill's already battered stock by Norwood. Wall Street analysts more commonly use a "hold" rating to telegraph their punches as a kind of "closet sell."

"Our concern is that business might not be at the level earlier anticipated for the June quarter," said Norwood. "Although we have nothing specific to point to, we note that apparel sales are far from strong, and that is typically the traffic builder for retail. If second quarter results are less than anticipated, WestPoint could have difficulty meeting amended covenants."

WestPoint recorded a harrowing 14 percent drop in sales during the fourth quarter of 2000.

A key concern, said Norwood, is the ultimate cost to WestPoint of the new debt offering priced to yield bond holders about 17 percent in interest payments. "We estimate the interest cost on the new money could be double that of the bank revolver. The fact that WestPoint would consider additional financing at such a high cost suggests to us that liquidity is a primary concern."

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