Burlington gets Ch. 11 reprieve
November 19, 2001-- Home Textiles Today,
Greensboro, NC — Despite the perceived eventuality of the event, Burlington Industries' filing of voluntary petitions for reorganization under Chapter 11 last week sent shockwaves through the textiles industry.
Filed with the U.S. Bankruptcy Court for the District of Delaware, case No. 01-11282, the move comes on the heels of Burlington's disclosure of its fourth quarter and fiscal 2001 results, which show net sales for the 12 months ending Sept. 29 totaling more than $1.4 billion but a net loss of $91.1 million. For the quarter, Burlington posted sales of $327 million, but net losses totalled more than $76 million.
"This filing is necessitated by the excess level of debt in our capital structure which prevents us from making the changes we deem necessary to our future success," said George Henderson III, chairman and ceo.
Henderson went on to cite the U.S. government and the economic recession as the reasons behind Burlington's decision to seek bankruptcy protection.
"A key factor that led Burlington to take these steps is the U.S. government's history of using the textile industry as a bargaining chip in international relations," Henderson said. "The results have been devastating for the industry, leading to job losses, plant closings and liquidations. Imports have been growing rapidly for many years, but since 1999, the volume of imported apparel has grown at five times the rate of consumption, squeezing out U.S.-made products to the point that four out of five garments sold in this country today are imported.
"To make matters worse, we are not competing on a level playing field. This flood of textile and apparel imports includes not only products subsidized by foreign governments, but billions of dollars of goods that are imported illegally. Our government, with the exception of support from elected officials in our region, has made no effective response to these unfair trade practices, and our industry does not have reciprocal access to the markets of importing countries."
In conjunction with its filing, Burlington also released a four-point business model which states that the company plans to continue to build its highly successful Lees Carpets business; expand the companies' global sourcing partners and leverage its own styling and technology capabilities internationally through Burlington WorldWide Limited; provide performance and fabric innovation through proprietary technology developed by Nano-Tex LLC; and build upon and accelerate the manufacturing improvements made in the company's North America operations.
In addition to its Lees Carpet business, Burlington also manufactures an extensive window and bedding line as well as bath accessories.
Helping to ease the blow of the filing, Burlington also announced that it had received a commitment for a facility of up to $190 million in debtor-in-possession (DIP) financing underwritten by J.P. Morgan Chase & Co. Pending its approval by the courts, the DIP financing will augment the company's stated liquidity of $60 million and provide the funds needed to operate during the reorganization.
According to the list of creditors submitted by Burlington for its filing, the company owes its number-one creditor, The Bank of New York, an unsecured note for $150 million. The Greensboro, NC-based manufacturer also owes the following creditors: E.I. DuPont NeMour, $8.1 million; Unifi Inc., $1.5 million; KOSA, $1.2 million; and CIBA Specialty Chemical $765,857.
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