LAST-MINUTE CHILL FROM BANKS FREEZES PLAID BID FOR GFT
MILAN--Milan merchant bank Mediobanca and GFT's seven leading creditor banks have put a halt to Plaid Clothing Group PLC's bid for GFT, sources close to the bank and GFT said over the weekend. At the direction of Mediobanca, which is masterminding GFT's financial restructuring, GFT's lawyers reportedly informed Plaid on Thursday that the financial plan presented by the U.S.-based group--controlled by Omar Al Askari--to acquire the debt-ridden GFT was unsatisfactory. "Mediobanca feels that Plaid hasn't offered sufficient guarantees," said one source familiar with the negotiations. Officials at GFT, Mediobanca and Plaid were not available for comment. Plaid, however, reportedly feels that it has respected all the terms of the talks and is furious at the way Mediobanca has handled the negotiations. It is said to be mulling legal action. According to sources, the banks have called for a temporary halt to negotiations with Plaid, leaving the coast clear for other bidders, although one source didn't exclude the possibility that in the end, Plaid could still wind up closing the deal. The pause in talks with Plaid does give the banks more time to consider an alternative bid from Mexican entrepreneur Fabio Covarrubias, who, as reported, reemerged with a new offer for the Turin-based GFT late last month. In March, on the verge of acquiring GFT, Covarrubias was sent packing by the banks after Plaid stepped in with a higher bid and secured an exclusive to negotiate for control of GFT. "Now Plaid is finding itself practically in the same situation Covarrubias was earlier this year," said one source, adding, "It seems once again as though the banks want to buy more time." In fact, the red light for Plaid comes just as the deal was set to be closed. Plaid had completed due diligence and handed in its final contract offer, and the preliminary contract was scheduled for signing Aug. 4, the same day Plaid received the no-go letter from GFT's lawyers. As reported, Plaid had offered to buy GFT for $251 million (390 billion lire) and had already paid a deposit of some $10 million to secure its status as an exclusive bidder, which expired, as reported, July 15. Although the second Covarrubias offer has never been officially confirmed, sources say that he is flanked by a group of Italian minority investors that appears to make his offer more palatable to the Italian banks. The banks, which essentially control GFT, have been reluctant to see the leading designer apparel maker fall into non-Italian hands. GFT, with reported 1993 sales at $945 million (1,474 trillion lire), produces for such designer names as Giorgio Armani, Calvin Klein, Claude Montana and Emanuel Ungaro, among others. However, the combined effects of the world-recession and the high costs of maintaining its industrial operations sent the company's finances into a downward spiral. GFT reported a 1993 loss of $125 million (196 billion lire), largely attributed to restructuring costs. Thanks to streamlining operations put into place by former managing director Clemente Signoroni, sales are steadily increasing and 1994 operating profit is expected to amount to $51 million (80 billion lire), more than twice the amount reported last year. It isn't clear, however, when GFT expects to return to the black, and though the operational outlook is improving, the company desperately needs fresh capital from a new owner to put its current problems definitely behind it. Signoroni--who resigned abruptly in June, ostensibly in disagreement over the Plaid bid but in what now is said to have been a revolt against him by top GFT managers--has been favored by the banks. He is also a part of the Covarrubias proposal, according to sources familiar with the plan. Nonetheless, this latest hurdle in GFT's year-and-a-half-long search for a buyer isn't a good sign for the company, which has been struggling along between one negotiation and another since early 1993. It has racked up debts of $386 million (610 billion lire) as of June, despite Signoroni's attempts to reduce the debt load, and a bridge financing plan carried out by the banks earlier this year. The Rivetti family, which controlled GFT through a private holding called Maggio '90, put the company up for sale in January 1993, when it realized it no longer had the resources to take the company forward. Marco Rivetti, who is largely credited with engineering GFT's designer label boom during the Eighties, remains chairman of the group, although he has little to say in its affairs now that the company is in the hands of the banks. An initial offer for GFT was made by neighboring apparel manufacturer Miroglio SpA, which later pulled out after taking a second look at GFT's financial situation. Fabio Covarrubias, who bought GFT's Mexican operations last year under a GFT divestment plan to raise additional cash, subsequently made a bid for the mother company, which he said was the perfect solution for making his textile and apparel interests into a truly international group. However, Covarrubias, who could not be reached at the weekend, withdrew his offer last March after Plaid arrived on the scene with a higher bid. Now the field appears to be clear once again for a new buyer, if there is still one or more left who dare to try.
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