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WPS Bidding Process Heats Up

Brent Felgner, Andrea Lillo -- Home Textiles Today, June 13, 2005

New York — It seems to be just Icahn and Ross. But no matter who else might show up at the WestPoint Stevens auction next week, the process will likely be punctuated by bids and overbids contingent on legal issues to be decided in a courtroom at least three days after the fact.

That could make the bidding and the result ambiguous, at best, requiring the competitors to engage in a series of “if-then” decisions during the June 21 auction. And that was clearly U.S. Bankruptcy Court Judge Robert Drain’s intent when he structured the auction, according to several attorneys involved in the process.

As the bid deadline for WestPoint Stevens came and went last Friday, June 10, creditors, their attorneys and others involved in the case were attempting to determine whether any additional bidders had surfaced. While Lorraine Miller, WestPoint’s senior vice president, finance, declined comment, there were broad indications the contest would come down only to the Steering Committee of first lien lenders with Wilbur Ross, and Aretex, an affiliate of Carl Icahn.

Chip Fontenot, WPS president and CEO, was at the West Point, Ga., mill last Friday but was said to be in transit back to New York by early Friday afternoon, within an hour of the bid deadline. WestPoint’s lead bankruptcy attorney John Rapisardi did not return calls.

“We were hoping that maybe some third party would show up,” said Lawrence Handelsman, attorney for the unsecured creditors’ committee. “We actually tried to get some third party (to come in), but it appears now that there won’t be. So we’re really back where we were when the judge said ‘no stalking horse.’”

Handelsman noted that the Committee’s financial advisors were still checking with WestPoint to determine if any additional bidders had surfaced.

“It’s a question of cash,” he added. “It looks like the world has concluded it’s not worth more. But if someone came in and said, ‘Look, I’m bidding $600 million in cash … ’ probably both sides would agree to that.”

With the passage of the last two months, the amounts that the Ross and Icahn groups intend to bid has also become uncertain. Originally, Ross stated he’d offer a $687.5 million deal for the mill, while Icahn claimed his offer was $800 million. It was clear at the time as well as now, however, that the true values were variable and buried deep in the asset purchase agreements.

The Steering Committee, Aretex, the Second Lien Lenders and DIP lenders have filed briefs and responses in preparation for the June 24 purchaser selection hearing, at which time the adversarial issues are to be hammered out. The core issues involve the priority of the payouts, to the extent they go, and most predominantly, the issue of credit bidding.

Further, at this point all indications seem to suggest a Section 363 sale will be the most likely result, since there’s been little, if any, discussion of a Reorganization Plan sale and Icahn still holds a blocking position. The 363 option gives the judge in the case the ultimate ability to craft the terms.

Moreover, the structure of the auction and litigation would seem to invite the possibility of appeal, depending on the outcome, potentially hanging up the result further. But, for his part, Handelsman sees obstacles to that scenario.

“I think unless they get a stay, it doesn’t really work,” he speculated. “One way or another, the judge will make a ruling and somebody will be declared a winner. Then unless there’s another party who screams, unless they get a stay pending appeal — in which case they might have to put up a bond — the sale will go forward and close while they’re appealing. Then it will be mooted.”

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