P'tex brands will survive
October 4, 2003,
New York — Pillowtex's brands — Royal Velvet, Charisma, Fieldcrest and Cannon — some of the best known brand names in the nation, will survive after all.
GGST LLC, the original stalking horse bidder, emerged victorious during the Oct. 2 auction after posting a $128 million offer — $72 million more than it originally agreed — for substantially all of Pillowtex's assets. It edged out another liquidation joint venture headed by PT Partners and The Peters Company by just $500,000.
But Franco Mfg. was an eleventh hour addition to GGST's consortium, brought to the table by the unsecured creditors' committee following the bid deadline Sept. 29, according to committee attorney Mark Indelicato Only entities that had qualified and filed bids by that time were permitted in Thursday's 10-hour marathon auction.
Whether Franco will emerge as a new powerhouse on Fifth Avenue by keeping some or all of the brands, remains unclear. While it may only be a passive investor, it was the only home textiles company known to be involved in the successful bid.
And when the proceedings commenced, Franco was there, alongside the GGST contingent, and remained there throughout, periodically caucusing as part of the group during counter-bidding deliberations, according to Indelicato and Harris Raynor, UNITE, co-chair of the creditors' committee.
The U.S. Bankruptcy Court is scheduled to consider final approval of the auction result Oct. 7. While objections remain to be considered, most believed it unlikely they would derail the court's approval.
After a slow start to the auction last Thursday morning as participants bottlenecked at the building security desk at Debevoise & Plimpton, Pillowtex's bankruptcy attorneys, events exploded into a flurry of activity later in the day.
About 100 people — bidders, bankers, creditors and lawyers — crammed into a conference room at the 35th floor of Debevoise's Third Avenue offices. Lunch and dinner were brought in during the course of the day.
The bidding was conducted in three parts: bids for component assets, such as brands, were first, followed by all-asset bidding for virtually the entire company, then a follow-on auction where component bidders had the option to up their bids further to out-value the all-asset bidders. Component bidding ended just before lunch, numerous participants said.
The end came shortly after 7:00 p.m. as the second round of bidding — the all-asset portion — finished and the follow-on component sale began. But no additional component bids were forthcoming, apparently because the component bidders realized the effort was futile, said numerous participants. The component bids, in their aggregate, would have had to beat the GGST offer for the entire company. The follow-on auction segment ended almost as soon as it began.
"Every component [of the asset bidding] was maxxed out," said Bill Melvin, ceo of National Retail Liquidators, part of the PT Partners consortium, as the proceedings broke up.
While most participants walked from the building grumbling over the outcome and their own lack of success in the bidding, others were plainly satisfied with the outcome.
"We sold the company," said a smiling but clearly exhausted Michael Harmon as he emerged from Pillowtex's attorney's offices later in the evening following the marathon.
Harmon, president and cfo of the bankrupt mill, was flanked by chairman and ceo Michael Gannaway. Harmon said he was happy that the value of Pillowtex's brands was recognized and reflected in the sale price.
"We're very pleased," he said in a brief interview in the lobby of Debevoise & Plimpton. But does the sale price reflect all he had hoped the company and its brands would bring? "We're very pleased," he repeated. "Let's leave it at that."
"We had an expectation that the brands were the value here, which is why we structured the auction the way we did," said the creditors' committee's Indelicato. "The way to get to the value of the company was to unlock the value of the brands. I don't know if we had a true expectation of where it would go — or if it went far enough — but we think this is a fair result."
In the meantime, it appears that the unsecured creditors will make at least some recovery from the auction.
"We are really pleased that the unsecured are in the money — they are definitely in the money — and somewhat substantially," Raynor said Friday morning after the auction. "What percent of the dollar people will get back is not yet clear."
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