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Dan River runs dry

The latest in a long line of textiles industry casualties, hammered by falling sales and low-cost offshore imports, and slow to meet the challenge of importing goods itself, Dan River Inc. has sought shelter from its creditors, filing for Chapter 11 protection in a U.S. Bankruptcy Court in Newnan, Ga.

With its sales tumbling at an alarming double-digit pace throughout most of last year in both its home fashions and apparel fabrics businesses, and its cash flow correspondingly throttled, the company was unable to pay a broad-based consortium of creditors that included lenders, Kmart — its single-largest retail account — suppliers, licensors, utilities and its own former workers.

After restructuring its debt last year in an earlier attempt to stave off a filing, the company said in its bankruptcy filing it had $371.8 million in total debts, compared with $441.8 million in total assets. A total of $182.3 million was owed to the 30 largest unsecured creditors, led by HSBC Bank, owed $167.3 million in senior notes; SunTrust Bank, owed $3.3 million in pollution control bonds; and former president and chief operating officer Richard Williams, who retired last December, owed $986,000 in nonqualified plan benefits. Williams was one of seven former employees listed among the 30 leading unsecured creditors, all losing out because of nonqualified benefits.

Surprisingly, two retailers — Kmart and Sears Canada — were on the list of the supplier's leading creditors, with Kmart owed $739,000, and Sears Canada owed $320,398, both for customer loads and allowances.

Among the hardest hit of merchandise suppliers was fabric producer P. Kaufmann Inc. of New York City, owed $603,129. Among Dan River's most important businesses is its line of juvenile licensed bedding, and two licensors are among the leading creditors, Spider-Man Merchandising, owed $481,008 in royalties; and NASCAR Licensing Group, with a claim of $217,708. Polyester producer Wellman Inc. is owed $429,993 in unpaid invoices.

The utilities that supply power, light and water also figure prominently on the creditors' list, and the fifth-largest is American Electric Power, owed $702,328. Next in line is Scana Energy Marketing Inc., owed $611,870 in accrued utilities.

At the root of its problems, said Dan River in its bankruptcy filing, is a deep slide in sales that left it short of the cash it needed to pay bills. As low-cost imports, some brought in by Dan River's domestic competitors, eroded its core bed-in-a-bag business — once thought by management to be impervious to imports because of its relative complexity — sales skidded by 22.1 percent for all of last year.

Before its Chapter 11 filing on March 31, as the New York Home Textiles Market wound down to a close, Dan River had lined up $145 million in debtor-in-possession (DIP) financing from a bank group led by Deutsche Bank Trust Company Americas. The bankruptcy court has given the company a green light to use up to $40 million of the new financing pact. Joseph Lanier Jr., chairman and CEO, said the court's swift approval of the financing "will enable the company to continue to operate without interruption and meet normal business obligations."

Lanier said that following last year's recapitalization, "The company's relatively simple capital structure should expedite the restructuring process," adding that he hopes Dan River can emerge from Chapter 11 by the end of the year.

DAN RIVER INC. UNSECURED CREDITORS

HSBC Bank, senior notes $167,339,000
SunTrust Bank, 7.5% pollution control bonds 1,257,750
Richard Williams, nonqualified plan benefits 986,000
Kmart Corp., customer loads and allowances 739,000
American Electric Power, accrued utilities 702,328
Scana Energy Marketing, accrued utilities 611,870
P. Kaufmann, unpaid invoices 603,129
Teijin Akra, unpaid invoices 579,543
EuroVista, unpaid invoices 563,911
Nanya Plastic Corp. America, unpaid invoices 533,479
Spider-Man Merchandising, accrued royalties 481,008
Robert Small, nonqualified plan benefits 450,000
Elliot Baum, nonqualified plan benefits 438,000
Wellman Inc., unpaid invoices 429,993
Grover Elliot, nonqualified plan benefits 392,000
Lester Hudson Jr., nonqualified plan benefits 388,000
Honeywell/Allied Signal, unpaid invoices 371,678
Cht. R. Beitlich Corp., unpaid invoices 357,563
Inland Paperboard & Pkg., unpaid invoices 323,434
William Mika, nonqualified plan benefits 322,000
Sears Canada (retail), customer loads and allowances 320,398
Alpha Decade First, unpaid invoices 310,184
City of Danville, accrued utilities 300,517
Sunstates Maintenance Corp., unpaid invoices 260,909
Noveon, Inc., unpaid invoices 221,774
NASCAR Licensing Group, accrued royalties 217,708
Progressive Screen Engraving, unpaid invoices 216,294
Hearst Magazine Brand Development, accrued royalties 209,537
Robert Crawford, nonqualified plan benefits 206,000
Cargill Cotton, unpaid invoices 193,682
Total Top 30 unsecured creditors $182,326,689


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