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Analysts forecast Ch. 11 for P'tex

NEW YORK -Boxed in by banks that are owed about $650 million, Pillowtex is facing a likely Chapter 11 filing by the middle of December unless it finds a white knight-or a white rabbit it can pull out of the hat. And saviors seem in short supply these days, according to Wall Street analysts.

"I think it's pretty evident that they're headed toward the Chapters. I think it's going to happen. I don't see how they can get around it," said Jack Pickler, textile analyst at Prudential Securities, Richmond, VA.

"I don't know where the money comes from," said Pickler. "I just don't know where they go. I don't see anything they can do to straighten it out. Part of the problem is, the market's not letting them do anything."

Can they raise cash through the sale of assets? "From what I can see, these guys can't seem to get going on an asset sale. At least [former ceo] Chuck Hansen couldn't focus on it. Maybe these new people running the show can get something going," he said. "I'm sure there are targeted properties they can sell, but there are just no buyers out there in this environment."

In a battered environment for textiles stock, Pickler asked: "Where do you find a buyer? This is the worst time I can think of in 23 years to sell something; there just aren't any buyers. And lenders of last resort? There aren't any."

And the clock is ticking. "To sell something takes time-due diligence, audits, all that takes 60 to 90 days," he said. "And I'm not sure they've got that much time."

And in a bankruptcy, Pickler pointed out, shareholders as well as the banks take a haircut. "The stock is worthless. I think that's where we are."

Pickler was looking for a silver lining when he said: "But who knows, maybe there's a move afoot to do something. Maybe there's a white knight, an equity investor out there, someone who will come in like Holcombe Green did when he bought into WestPoint and virtually saved the company. But if there is, it eludes me."

Kay Norwood, analyst at Wachovia Securities, Charlotte, NC, said the bank's sudden action last week blocking Pillowtex from making interest payments on its bonds and throwing it into default apparently caught the company by surprise.

"They were able and prepared to make the payments, so this had to have been a surprise to them," she said.

"I don't see what they get out of it," she continued, making the bankers' actions all the more puzzling. "It's strange to me that the banks have to know that the bond-holders can now force the company into bankruptcy. And how does that make things better for the banks? How do they come out ahead in a bankruptcy?"

Norwood said the banks' action "increases the likelihood of a bankruptcy filing, though I'm still not at the point where I'd say it's inevitable. But, boy, it sure doesn't look good right now."

Could there be a buyer for Pillowtex? "I don't think a buyer would want to step up now and buy something that could get cheaper later. But who knows, there's always the possibility of an equity investor. That would certainly give them the breathing room they need."

Norwood concluded, "I sure hate to see all this happening, especially because it looked like they were making some headway and doing all the right things."

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