Byline: Sara Gay Forden

MILAN — An unofficial auction appears to be shaping up for GFT, while creditor banks for the troubled manufacturer of designer labels consider the $276 million (430 billion lire) bid Plaid Clothing Group made Monday.
Although Mediobanca, the investment bank that is leading the GFT sale effort, said the banks are taking a “pause to reflect” on the new Plaid bid, the attitude in the market here is that the door has been effectively opened and that a bidding war could soon be under way.
Plaid chairman Omar Al Askari told WWD his latest offer was final and that he wasn’t interested in participating in an auction. Other interested buyers, however, are believed to be jockeying for position since Plaid no longer has an exclusive right to negotiate for GFT.
While Mediobanca said it has not officially invited other bidders to step forward, sources familiar with the negotiations said a bidding war could push the price for GFT as high as $320 million (500 billion lire).
According to the sources, Mediobanca has set another meeting with GFT’s creditor banks for Monday to review the situation.
“The banks are meeting to make a decision,” one source said.
Plaid had asked the creditor banks to accept or reject its latest offer by Tuesday, Nov. 15. “Our understanding is that the banks will consider other bids,” said a spokesman for CVC Capital Partners, the venture capital firm associated with Citibank. In September CVC made an offer for GFT, although it was subject to due diligence and financing. CVC is expected to present a new bid any day, probably with a higher figure and a stronger financial plan, although the spokesman said CVC is taking a “wait-and-see” position and declined to discuss details of a new bid.
But CVC is now saying the offer it has already put on the table is for $276 million (430 billion lire) rather than $269 million (420 billion lire), as previously reported. The spokesman denied reports in financial circles here that CVC had actually upped its bid to match Plaid’s new offer.
Another interested buyer, U.S. investment fund Texas Pacific Group — which has taken the place of an earlier bidder, Mexican entrepreneur Fabio Covarrubias — is expected to make a bid by Monday as well. Some sources speculated that there might be another unknown bidder still in the wings, although rumors of interest from Fiat group investment company Gemina SpA and from the textile division of Courtaulds PLC have so far proved to be only that.
Meanwhile, time is running short if the banks want to secure a buyer for GFT before the end of the year, when some $69 million (102 billion lire) in warrants they took out earlier this year are due to expire.
“If they reach a solid agreement with a buyer and for logistical reasons the closing doesn’t take place until early next year, then they can probably extend the warrants, which will then be transferred to the new owner,” said one financial source.
“But if there is no deal, they will have to convert those warrants into equity and take a writedown,” he said.
While some of the banks are reportedly pushing for a deal by year-end to avoid a write-down, others are reportedly dragging their feet, with the idea that given a little more time they may win a higher price.
Meanwhile, the lack of transparency surrounding the process of selling GFT, which has been on the block for two years now, has become an issue itself. Confusion is building on all sides and within the company itself about GFT’s future prospects and the criteria being used to evaluate the potential buyers. After months of talks separately with three different buyers, it still isn’t clear whether GFT will be sold to the highest bidder, how other considerations such as the nationality or the business profile of the potential buyer come into play, and to what extent Marco Rivetti, who used to control GFT, has a role in the whole process. Although Rivetti technically lost control of the company (in which he still has a 10 percent stake) when it fell into the hands of the banks, he has been actively involved in the discussions and is still thought to have a great deal of influence in Italy’s “salottobuono,” or “inner circle” of manufacturing families and financiers close to Mediobanca.
Even the role of Mediobanca, the Milan merchant bank that has been masterminding the process, isn’t entirely clear: it has a mandate from Rivetti to sell the company, but it also has one from the banks to mastermind GFT’s financial restructuring. Rivetti wasn’t immediately available for comment, and in the past has always declined to say anything on the matter.
“It feels like we’re back to square one again,” said one source familiar with the negotiations. “I have the feeling things are going to get strung out even longer.”

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