Icahn Ups WestPoint Stake

Businessman Increases Share of Debt

Tom Edmonds, Don Hogsett, September 28, 2004

New York — Clearly seeing value in a company, and an industry, that others have walked away from, high-profile financial engineer Carl Icahn has reportedly increased his stake in WestPoint Stevens as the textiles titan gets ready to emerge from bankruptcy, possibly by early next year.

Icahn bought a chunk of WestPoint’s second-lien bank debt in May, and is now said to have taken an even larger position in the company, buying about a third of its first-lien bank debt from Q Investments, a private investment firm based in Fort Worth, Texas.

The move would put Icahn in a position to engineer an outright takeover of the company as it emerges from Chapter 11, swapping his debt for shares in the reorganized company.

Holders of secured bank debt, as opposed to bond holders, are first in line when it comes to getting something in a bankruptcy restructuring, usually exchanging their bank debt for common stock.

Mary Gilbert, managing director of Imperial Capital, a Beverly Hills, Calif., investment firm which tracks the company, said WestPoint’s first-lien bank debt totals about $456.7 million, which would value a one-third stake at about $162.2 million.

Lorraine Miller, WestPoint Stevens senior vice president for investor relations, declined to confirm that Icahn has increased his stake in the textiles producer. “I cannot confirm that. Unless it’s a matter of public record, we cannot comment on the holdings of any individual,” she said.

While sales of common stock are closely regulated by the Securities and Exchange Commission, individual sales of bonds and debt are not subject to the same stringent federal-reporting requirements.

Earlier this year, WestPoint CEO M.L. “Chip” Fontenot confirmed that Icahn had acquired a portion of the company’s second-lien debt.

Icahn has developed a reputation over the years as a savvy investor who does his homework, with a keen eye for spotting troubled companies that can be rebuilt and turned around, generating a handsome return in the process. At the same time, he’s acquired a reputation as a ruthless slash-and-burn operator, often fixing up troubled companies by reducing their cost structures.

Mary Gilbert of Imperial Capital commented, “He obviously sees value here. He must have a plan that he thinks is viable, more viable than their plan. I don’t think he’d use their exit plan. I also think he’d bring on his own management team. But he obviously sees value in the company.”

As of press time, officials of Icahn and Co. and Q Investments had not responded to requests for comment.

Earlier this year, when Icahn first took a stake in the company, Fontenot was asked if Icahn had signed on as a passive investor, or was likely to take an active role at some point. He responded then: “There’s really no way to tell. There are a lot of people with a lot of money who are chasing this company. Clearly, they must believe what we’ve known all along — this is a very good company with a very bright future.”

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