P'tex plan to exit Ch. 11 passes

Don Hogsett, March 4, 2002

Textiles giant Pillowtex Corp. moved a big step closer to emerging from Chapter 11 and a return to financial stability when a U.S. bankruptcy court judge in Delaware gave a green light to the company's disclosure statement, outlining its reorganization plan.

The move allows Pillowtex to submit the proposal to creditors, who must vote on it by April 19. If the plan gets the nod from banks and bondholders, the company could emerge from bankruptcy a stronger and much leaner company by late May or June.

That approval could be something of a done deal, the details mostly hammered out, and Tony Williams, Pillowtex president and coo, signaled that when he said, "Both the senior bank lenders and the general unsecured creditors' committee support our plan." Williams added, "This support is particularly encouraging and keeps us on schedule to emerge from bankruptcy mid-year."

Saddled by a crushing debt load rung up in a long string of acquisitions — dating all the way back to the Fieldcrest buyout of rival Cannon Mills and culminating in Pillowtex' buyout of the entire Fieldcrest Cannon operation — Pillowtex sought the shelter of the bankruptcy court 16 months ago, in November 2000.

Since then, the company has been streamlined, down-sized and re-engineered under president Tony Williams, an out-of-the-box thinker who came to the home textiles industry from Detroit, and who has been re-formatting the company's systems, consolidating plants and fine-tuning operations. Even during a trying 16 months in bankruptcy, and against the backdrop of a U.S. recession and a slowdown in consumer spending, Pillowtex was able to accomplish a dramatic makeover of its New York showroom and has maintained what even its competitors acknowledge as superior customer service. "In fact, we've won a lot of awards from our customers for our service over the past year, and that's something we're really proud of," Mike Harmon, chief financial officer, told Home Textiles Today.

"We're excited. We feel real good about what we've accomplished and the way this thing is going," said Harmon. "Both the secured and the unsecured creditors' committees said in bankruptcy court this week that they support the plan. All the banks support it in a big way. So it looks good. But still, you hesitate to call it a done deal until the fat lady has sung."

Laying out the timetable, Harmon said creditors are scheduled to vote in April, and a confirmation hearing is scheduled in a U.S. bankruptcy court on May 1. "At that time, we expect to receive approval from the creditors, and then the court will lay down a few conditions before we can emerge. Probably the biggest condition is that we have secured new financing. And we believe we will have the financing in place by that time. All that done, we're saying that we should be out of bankruptcy by some time in June."

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