WPS will emerge 'stronger'
June 16, 2003,
Hobbled by debt and its cash flow anemic, WestPoint Stevens "should have filed for bankruptcy two years ago, and we would have saved ourselves a whole lot of grief," interim ceo Chip Fontenot told HTT last week.
WestPoint had hoped to avert a prolonged, and costly, journey through the courts with a streamlined, pre-packaged bankruptcy in which creditors have agreed to a settlement even before the company goes into court, said Fontenot. And while three big blocs of bondholders had come to terms with the company, a speedy pre-packaged settlement was scuttled when bank lenders wouldn't support the plan, he said.
"We would have preferred to do a pre-pack, except for some reason the banks didn't let us go that route and weren't willing to support us in that."
Now, said Fontenot, "we're working to come to an agreement with the creditors so that it won't have to be settled by the court." As it stands, "They're all negotiating. They know what they want, they're just trying to find common ground."
Fontenot added, "Our hope is that we can get through this very quickly. We'd like to be out by the end of the year."
While officially president and coo, Fontenot had been functioning for the past few years as de facto ceo as well, while lame-duck chairman and ceo Holcombe Green was preoccupied propping up his various other financial ventures. And now Fontenot makes it official, adding the title interim ceo in the wake of Green's ouster as part of a deal cut with bondholders.
Clearly, if quietly, taking charge — banging the drums loudly is not part of his style — Fontenot emphasized there will be no wholesale plant shutdowns as WestPoint rights its shaky finances. "It's strictly a balance sheet issue. Everything else is working fine. Our plants are extremely efficient, and we have not put together any plan to have massive plant closings. We've already done a lot of restructuring over the past several years. What we will do is what we do normally, and this is to streamline operations. But there are no big plans for massive closings. This bankruptcy is not about the plants — it's a balance sheet issue."
Fontenot added, "We've got a company that operationally is as good as anything out there. The plants are terrific, the people are great. That part of the company isn't broken. What we have is an inappropriate balance sheet that's held us back from doing a lot of things to make a good company even better."
One streamlining coming up, said Fontenot, will be at the company's chain of retail stores. "We have just shy of 60 stores, and we'll be reducing that in the range of 20 percent or so."
Declining to break out sales of the retail stores, Fontenot said, "They're not critical to our business, but they are an important piece of our business. They help us to repair merchandising mistakes, and they allow us to swap out goods with our customers."
As the company sheds much of its daunting debt of more than $2.1 billion — "I can't speculate at this point what our debt level will be when we come out" — it will be in a much stronger position to source more overseas product and strike up joint ventures, said Fontenot. "We just haven't had the financial wherewithal for some very attractive joint ventures around the world." It wasn't so much a matter of restrictive debt covenants, he said. "We simply didn't have the cash. I'm talking about real joint ventures that require 50/50 investments. We just didn't have the ongoing funding."
Clearly sensitive on the point of sourcing, Fontenot emphasized, "We already source close to $350 million a year now. It's not like we don't source. That number is bigger than a lot of the people we compete with."
Once cash is freed up and WestPoint is in a position to form international joint ventures, "It could be for any product, from any country. It could be weaving, it could be finished product. It will cover most of our product offerings."
But WestPoint is unlikely to start sourcing greige goods, Fontenot said. "We're very competitive on greige goods once you add the freight. Our plants produce greige goods very cost effectively."