Dan River Liquidating
April 21, 2008,
The landmark sign "Home of Dan River Fabrics" was pulled down six months ago. Last week, what is left of the once formidable U.S. mill began dismantling as well.
The company let the majority of staff associated with its U.S. home fashions business go last week and is operating with a skeleton crew. The U.S. hospitality businesses owned by parent company GHCL — Best Manufacturing and HW Baker — are reportedly remaining in operation.
Employees still on the job were moving quickly on retailers to unload merchandise. So were Dan River's own vendors, who were caught unawareness by the abrupt decision to fold the operation.
A Dan River executive told HTT that the company would be releasing no information to the press at this time.
Information obtained by HTT for this report came from interviews of executives in home textiles retailing and manufacturing who were informed by Dan River directly about the situation.
Just weeks ago, GHCL announced it would spin off the home textiles sourcing and manufacturing division to a 100%-owned subsidiary, and also shift India and U.K.-based retail operations to a 100% retail subsidiary. The home textiles company was to include three U.S.-based businesses: Dan River, HW Baker and Best Textiles. The retail business includes the 300-store Rosebys home furnishings specialty chain in the U.K.
Under the plan, the legacy GHCL business, comprising soda ash mining and manufacture, would continue to be listed on the Indian stock exchanges.
GHCL acquired Dan River in January 2006 in a deal worth $93 million: $17 million in cash plus the assumption of $76 million in short- and long-term debt.
In a filing with the Bombay stock exchange at the time, the equity cost was to be funded through Foreign Currency Convertible Bond (FCCB) issue proceeds while the existing debt was to be refinanced. GHCL accomplished the buyout by paying several secured creditors' groups that held equity in Dan River a "heavily negotiated, arms-length price of $0.085 per share," according to bankruptcy court documents.
Dan River had filed for bankruptcy protection in March 2004, worn down by competition from lower-cost imports as well as the impact of major customer Kmart Corp.'s 2002 bankruptcy and subsequent store closings.
Dan River exited bankruptcy in early 2005 having whittled down its debt to approximately $90 million from some $270 million at the time of its filing for Chapter 11. A new common stock was authorized for issue to some of the company's post-emergence lenders and to its unsecured pre-petition creditors. The total exit financing was $140 million, including $110 million from a revolving credit facility by Ableco Finance LLC.; a $10 million loan from Ableco; and an additional $20 million from a group of bondholders.
Dan River was No. 10 in the HTT Top 15 Supplier Giants as recently as 2006, when it posted 2005 revenues of some $259 million. It peaked in the rankings in 2002, when it became the 5th largest manufacturer, with 2001 home textiles sales of $482 million.
But as was the case with other now-defunct U.S. mills, Dan River's manufacturing base was already beginning to crumble as it sought to fend off exports. Since 1997, the company steadily closed 18 plants across the south, according to data from the National Council of Textiles Organizations.
Its distribution center remains open at the moment, fulfilling orders and clearing inventory. Dan River told retailer accounts that it plans an orderly transition of its programs to other vendors.