NEW YORK — “We are not liquidators. Our symbol is not the vulture but the phoenix, the mythical bird that arises anew out of its own ashes.”
Those were the philosophical words of Wilbur L. Ross as he met Friday morning with a group of 100 top managers at Burlington Industries Inc., which he has agreed to buy out of bankruptcy.
“No employee needs to have any more worry that he or she will lose benefits or a job because the parent company runs out of money,” Ross continued, according to a copy of his prepared remarks he provided to WWD. “In fact, we are eager to find ways to improve the business, and if that takes more capital but seems likely to generate high return, we will invest more capital.”
Rather than marching into the company’s Greensboro, N.C. headquarters with a plan to refashion the ailing giant, Ross arrived armed with two stacks of questionnaires — eight questions for members of senior management, 15 for divisional and unit managers. He said he’d use the answers —on subjects ranging from strategic direction of the company to the compensation of senior executives — to develop a plan that would allow the company to have “a running start” when the deal closes, which is expected sometime in late October.
“I was very pleased with the enthusiasm of the people down there today,” Ross said in a phone interview. “I asked each of the unit managers to come up with a new strategic plan and to think outside the box, now that they are unlimited by that terrible balance sheet. Once you get the feedback from the people into the intimate details of the operation, you have a better idea of just how to sort things out.”
On Friday afternoon in Wilmington, Del., U.S. Bankruptcy Court Judge Randall J. Newsome approved an agreement for Ross to buy the company for about $614 million. That figure is lower than the $620.08 million bid that won the Monday auction for the company. The bid was revised after the judge late Thursday struck down the $6 million breakup fee in the previous agreement.
Objections to breakup fees led to the scuttling of Warren Buffett’s Berkshire Hathaway Corp.’s earlier $579 million bid for the company.The Ross deal calls for Burlington to pay its secured creditors in full, pay its unsecured creditors about 41.5 cents for every $1 in claims and to emerge from Chapter 11 proceedings as a privately owned, debt-free company. Ross has agreed to sell Burlington’s Lees Carpet to Calhoun, Ga.-based Mohawk Industries Inc. for $352 million.
That will leave him with Burlington’s apparel-fabrics and interior-furnishings operations, which had combined sales of $728.7 million and posted a pretax loss of $47.4 million in Burlington’s last fiscal year ended Sept. 28. Ross said he intended to operate the remaining businesses as a single company.
The agreement is subject to regulatory approval and to the court’s approval of Burlington’s reorganization plan.
Burlington chairman and ceo George W. Henderson said in a separate phone interview that he was heartened by Ross’ words.
“He talks not just about buying Burlington and investing in it, but about investing in our growth,” he said. “We have not had the financial wherewithal to even think that way in a long time.”
Henderson said Ross had begun investing in Burlington’s debt — of which he now owns about 25 percent — since before the company filed for bankruptcy court protection in November 2001.
Ross told employees he’s intimately familiar with the problems that the pressure of competing with foreign producers have placed on U.S. companies. International Steel Group, a firm Ross built out of the ashes of three bankrupt steel mills, filed its prospectus Thursday in preparation for an initial public offering.
“I am unalterably opposed to what I call ‘foul trade,’” said Ross, explaining that countries that seek trade deals with the U.S. should be made to open their markets to competition from U.S. companies. “The World Trade Organization must change the way it makes decisions. It now operates by consensus and 145 of its members have one main objective — improvement of their trade balance with number 146, the U.S.”
Ross said he was pleased that the court approved his bid for Burlington.
“All the constituents, the debtor and banks and creditors committee are all on board with it,” he said. “Now, the big question will be, ‘Were we right?’”
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