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NEW YORK — Malden Mills Industries Inc. and Guilford Mills Inc., two of the four major U.S. textile mills currently operating under Chapter 11 protection, took steps this month that brought them closer to returning to solvency.
This story first appeared in the August 27, 2002 issue of WWD. Subscribe Today.
As reported, on Aug. 19 Malden Mills Inc. filed its plan of reorganization at the U.S. Bankruptcy Court in Worcester, Mass., proposing to pay back all its creditors in full — an unusual move for a bankrupt company and one that will allow the family of president and chief executive officer Aaron Feuerstein to retain sole ownership of the Lawrence, Mass.-based fleece maker.
David Costello, business manager, said the reorganization plan, which is subject to court approval, could allow the company to emerge from bankruptcy by the end of the year. The company will be carrying $140 million in debt, and is on track to record $190 million in sales for the fiscal year that ends in October, he added.
Last year, the company recorded sales of about $220 million.
The plan also calls for Feuerstein to retain his post at the head of the company, an idea some creditors had challenged, according to sources.
Since filing for bankruptcy in November, Malden has lined up additional contracts with the Department of Defense to provide cold-weather fabrics to the U.S. military. Sales to the military now represent almost 10 percent of its business, Costello said.
Malden has not made major operational changes since seeking court protection. In the year before its filing, the company cut its workforce by about 100 workers, to its current head count of about 1,500. Executives said Malden continues to consider expanding production into Asia or other low-cost nations — right now it manufactures primarily in Massachusetts, with a small plant in Germany — but the company has not yet made any firm moves to shift more production overseas.
On Aug. 15, Greensboro, N.C.-based Guilford began soliciting votes from creditors and stockholders on its proposed reorganization plan, which it filed in Manhattan bankruptcy court last month. The company said its confirmation hearing is set for Sept. 19, which could allow the company to exit Chapter 11 by the end of next month. The plan calls for Guilford, which as reported filed for bankruptcy protection in March, to turn over a 90 percent ownership stake to its creditors.
“The process continues to move forward quickly,” said John Emrich, president and chief executive of Guilford.
Under the leadership of Emrich, who in 2000 succeeded the late Chuck Hayes, Guilford has substantially restructured itself. Last year the company closed six of its mills, and following its bankruptcy filing said it would close two more. It has largely exited the apparel-fabrics business, with its sole venture in the category now being a Mexico City factory that produces sportswear and lining fabrics.
The company today is focusing on industrial and automotive fabrics, two areas that face less intense competition from overseas competitors, according to Emrich.
Burlington Industries Inc. also continues to operate under court protection. The company has significantly cut its workforce and operations over the past few years, and since its November 2001 filing opened an arm in Asia that sells fabric made by foreign mills. Burlington executives said they don’t expect the company to emerge from bankruptcy before next year.
Galey & Lord Inc. officials have not commented on when the company expects to emerge from bankruptcy, but according to filings with the Securities and Exchange Commission, the mill has the exclusive right to file its reorganization plan through Oct. 1, a deadline which can be extended. It filed Chapter 11 last February.