Dan River seeks $32 million in financing
April 22, 2008,
Wilmington, Del. – Dan River, which filed for Chapter 11 protection in the bankruptcy court here on April 20, said in court filings that it has arranged to borrow as much as $32 million from GMAC Commercial Finance to fund its restructuring.
According to the bankruptcy filing, Dan River missed its sales forecast by $5.3 million and its EBITDA (earnings before interest, taxs, depreciation and amortization) by approximately $4.6 million in the first quarter of 2008. The company also said price decreases demanded by its retail customers threatened to erode projected gross margin to less than 10% from the current 17%.
Because many of Dan River’s major accounts are developing their own designs, the U.S. division in mid-March proposed to GHCL that the operation restructure to focus on a core of high-volume retailers that require little design or service support, according to court documents. The plan would require an additional investment of $5 million to $10 million.
“Given the current economic environment, however, GHCL determined that it was not willing to make this additional investment in Dan River,” according to the filing.
Among secured creditors at the time of filing, GMAC was owed roughly $24.4 million. GHCL was owed approximately $58.1 million secured by assets, much of the figure junior to the leins of GMAC. GHCL was also owed nearly $15 million in unsecured notes.
In its filing, Dan River listed assets of $50 million to $100 million and debt of $100 million to $500 million.
In 2007, Dan River generated net sales of $195,292,000. The amount of total receivable collections forecast for the eight-week period from April 26 to June 14 is approximately $12.6 million, according to the filing. Dan River’s top five customers for the period were, in order, Kmart, Wal-Mart, Anna’s Linens, JCPenney and Sears Direct.