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Guilford issues new common stock

With a green light in hand from a U.S. Bankruptcy Court, Guilford Mills Inc. is now set to emerge from bankruptcy by Oct. 1, canceling all of its old stock and distributing a new issue of common stock to the company's new owners, mostly its former creditors.

On the effective date of the bankruptcy plan, all of Guilford's existing common stock will be cancelled and the new shares will be distributed, with 90 percent going to lenders and the remaining 10 percent to existing shareholders.

About 5.5 million shares of the new common stock will replace about 18.6 million shares of existing Guilford stock. The new shares will continue to be traded on the OTC Bulletin Board, under a new ticker symbol, yet to be assigned.

Once the new stock is issued, only the 10 percent in the hands of original shareholders will immediately be traded. The other 90 percent will remain in the hands of lenders for at least several months. Guilford said that, after a period of four months passes, some of its senior lenders may require the company to file a registration certificate with the Securities and Exchange Commission, allowing them to sell some or all of their stock and cash out.

Weighed down by a crushing debt load, and squeezed by falling sales, Guilford filed for bankruptcy protection only six months ago, on March 13, and in a subsequent restructuring sold off its Guilford Home business and brands to focus on its core automotive upholstery and apparel fabrics businesses. Under the terms of its plan of reorganization, all of Guilford's trade creditors will be paid in full.