NEW YORK — Warnaco needs more time.
Citing the large size and complexity of its various businesses, the bankrupt Warnaco Group has asked for another extension in filing its reorganization plan. The company — which was expected to file its plan this Friday — has instead asked for a one-month extension to Sept. 30. A hearing is scheduled for Wednesday at 9:45 a.m. This is the fourth postponement Warnaco has sought.According to court papers filed Aug. 14, Warnaco is seeking a postponement because its 38 Chapter 11 cases “are extremely large and complex with thousands of creditors and debts exceeding $2 billion.”The company’s liabilities, subject to compromise, stood at $2.47 billion on July 2, 2002, versus $2.44 billion on Jan. 5, 2002. Total liabilities on July 2 were $2.66 billion.Although Warnaco, which filed bankruptcy on June 11, 2001, said it had made “substantial progress” in meeting the Aug. 30 deadline, it felt it would not be able to meet the target date.Antonio Alvarez, president and chief executive officer of Warnaco, couldn’t be reached for comment Friday. However, a spokesman said: “We’re completing the exploration process regarding the sale of the businesses for the purpose of comparing values. We still believe we will emerge as a stand-alone company.”The filing says that Warnaco is nearing the completion of the exploration process with respect to the potential sale of “core” business units for purposes of comparing the values that might be achieved in a sale with stand-alone reorganization values. To date, no “core” businesses have been sold. The filing notes that although it is possible that a sale of one or more business units might occur prior to Warnaco’s emergence from bankruptcy or its plan of reorganization, the company expects to file a plan providing for the “internal restructuring of all their “core” businesses and the emergence of the company as a whole from Chapter 11 on a stand-alone basis. Sources told WWD that the extension is just part of the natural process, and the company, which is “very sound right now,” is expected to emerge leaner and in much better shape.As reported earlier this month, VF Corp. is still seen as a potential buyer of Warnaco and could acquire the company after it emerges from bankruptcy with its lenders as the new owners. However, bankruptcy sources said a more likely scenario would be for a deal to occur before the filing of the reorganization plan, with VF in effect “funding” the plan of reorganization. A VF spokeswoman said Friday: “We have no news or comment at the present time.”Allen B. Schwartz, design director of ABS by Allen Schwartz, which is part of Warnaco’s stable, said Friday: “My feeling is they’re going to hold off selling and make the companies better and get them running right. They’re going to wait and sell it to the people who will pay. No one will steal these companies.”Schwartz said ABS is having its best year in 21 years. “I’m working hard to put a [venture capital] group together to buy the company.”As reported Aug. 6, Warnaco said it expected “no material impact” on its reorganization plans as a result of the Securities and Exchange Commission’s ongoing investigation into the company’s accounting practices. At the time, it said it would meet its Aug. 30 deadline. A Warnaco spokesman said Friday that the SEC investigation wouldn’t impact a Sept. 30 deadline.The current SEC investigation into Warnaco’s accounting has been under way since before it was first disclosed by Warnaco in April 2001.Warnaco acknowledged in its 10-K last month that it had been informed the commission intended to “recommend that the SEC authorize an enforcement action against the company and certain persons” who were employed by or affiliated with the firm before the start of its 1999 fiscal year on Jan. 3, 1999.While Warnaco is comprised of over 100 separate legal entities worldwide, the court papers note that 38 of the company’s legal entities are Chapter 11 debtors. Its divisions include the Intimate Apparel group (including Calvin Klein Underwear, Warner’s, Olga and Bodyslimmers brands), its Swimwear group (including Authentic Fitness) and its Sportswear group (including Calvin Klein Jeanswear, Chaps by Ralph Lauren and Catalina/White Stag brands). The filing notes that the debtors owe in the aggregate over $250 million in unsecured (including unsecured subordinated) amounts to creditors.The motion notes that since Warnaco filed bankruptcy, it has “successfully stabilized and improved its businesses.” It says it has maintained “more than enough liquidity to fund operations,” and the company has excess cash of $72 million as of Aug. 9, 2002. The filing notes the company has paid down completely all outstanding balances under its $600 million debtor-in-possession financing facility.Under Alvarez’s leadership, the filing notes that Warnaco has consolidated operations, facilities and functions; eliminated nonessential departments; implemented wide-ranging cost-cutting measures, and rejected approximately 102 leases of unprofitable retail stores and other unnecessary facilities. In addition, it has rejected costly leases of an aircraft and a helicopter and reduced corporate overhead costs by approximately $20 million from fiscal 2001 to fiscal 2002. According to the court papers, in the six months ended June 30, 2002, Warnaco generated consolidated EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring costs) of $73 million, which compares with full-year fiscal 2001 consolidated EBITDAR of $20.2 million.So far, Warnaco has completed the sale or liquidation of several “noncore” units. The sales of GJM Sleepwear and the Penhaligon’s beauty chain have generated gross proceeds totaling about $20 million, and IZKA, a French maker of seamless intimate apparel, has been liquidated, according to the filing.As reported, Warnaco filed a Form 10-K on July 31 detailing $51 million in restatements for three fiscal years beginning in 1999. Warnaco said that, in a review of business operations in June 2001, it “became aware of certain accounting errors involving the recording of intercompany pricing arrangements, the recording of accounts payable primarily related to the purchase of inventory from suppliers and the accrual of certain liabilities.”These errors were related to the Designer Holdings Ltd. subsidiary, as well as to the recording of accounts payable and inventory data discovered in 2001 figures involving its European subsidiaries. The SEC has declined to comment on the investigation, so it isn’t known whether its eyes are focused on the Designer Holdings unit, the makers of Calvin Klein jeans, acquired in 1997 for $354 million, or some of its other domestic units.