Banks squawk; reorg plan in do-over
October 20, 2003-- Home Textiles Today,
Hitting something of a speed bump as it works its way through bankruptcy proceedings, west point Stevens said it's scrapping its original plan of reorganization after bankers failed to sign on, and is now cobbling together a new proposal that lenders might find more palatable.
The sticking point was not how much of a haircut the bankers will have to take, but more an issue of how much debt will remain on the company's books once it emerges from Chapter 11, according to Lorraine Miller, west point Stevens' senior vice president for investor relations.
"Typically, banks are concerned with the amount of leverage on the books when a company comes out, and as far as they're concerned, less is better. They want to make sure nothing is there to jeopardize repayment or their interest in the company," said Miller.
Miller emphasized, "Basically, this doesn't really change anything fundamental, but it does alter the timetable. Originally we had talked, perhaps optimistically, about emerging by the end of the year. But now we're probably looking at filing a new plan of reorganization by the end of the year and coming out by the end of the first quarter. That's probably a more realistic time-frame."
She added, "By no means can this be characterized as any kind of a setback. It's not like we're going back to square one. It's just a routine part of the process where you try to hammer out a deal that's acceptable to different constituencies. Most of the provisions of the plan remain in place, it's just some of the details that need to be reworked. Even with a delay, coming out by the end of the first quarter would be considered a rapid conclusion to a process that often can take more than a year."
Bank lenders, and not the controlling group of bondholders who will eventually own the company, have been an obstacle long before WestPoint made its bankruptcy filing in June. "Clearly, if we had the support of the bankers to begin with we'd have filed a pre-packaged bankruptcy and been out by now," said Miller.