GUILFORD MILLS FILES CHAPTER 11
Byline: Scott Malone
NEW YORK — The day the mill that’s been his life for a half century entered bankruptcy, Chuck Hayes said he is thinking seriously about retiring.
“I am giving consideration that some time over the course of this year, I will totally retire out of the textile industry,” the 67-year-old Guilford Mills chairman told WWD Wednesday. “I have not made an absolutely firm decision yet. That I’m going to make some time in the month of May.”
Guilford, based in Greensboro, N.C., filed a pre-negotiated Chapter 11 petition in a New York bankruptcy court on Wednesday. Hayes acknowledged that the possibility of losing his seat on the board as part of the bankruptcy reorganization factors heavily in his decision.
“I’m a tough old son of a bitch and I’m not going to play second fiddle to any bank,” said Hayes, whose term as president of the American Textile Manufacturers Institute ends at the group’s annual meeting next week.
Hayes started in the textile industry in 1950 at the age of 16, when he decided to leave high school and his job at his family’s Gloversville, N.Y., farm and take a position at a local knitting mill. Just 12 years later, at the age of 28, he was named president of Guilford, a year after joining that firm. Within five years, he was made chairman.
He led Guilford Mills for three decades and was the driving force behind the company’s decision to open mills in Mexico in the Eighties. That was at a time when most U.S. textile executives opposed substantial international trade.
In 2000, Hayes handed over oversight of day-to-day operations to president John Emrich, naming him chief executive officer. Hayes said he believed it was time to turn over leadership of the ailing U.S. textile industry to a younger generation of entrepreneurs.
“The industry itself is really going through such difficult times+it reminds me of myself 50 years ago,” he said. “Entrepreneurship will reign again. It will be king. Large corporate structures will default and fail. The young entrepreneurs, like from 50 years ago, will be very successful. They will build a new empire of textiles that the world has never seen before.”
Guilford’s is the latest in a series of major textile bankruptcies. Burlington, Malden Mills and Galey & Lord have all sought court protection in recent months.
Emrich said the firm has worked out with its lenders a prepackaged Chapter 11 reorganization program that would cut its debt by $125 million in exchange for giving its two main lenders a 90 percent equity stake in the company. Guilford said First Union has agreed to provide $30 million in debtor-in-possession financing, subject to court approval.
He said he expected the mill’s bankruptcy to be “a quick in-and-out process,” adding that the agreement calls for trade creditors to be paid in full and does not completely wipe out the stockholders’ stake.
Over the past two years, Guilford has substantially restructured itself, with three-quarters of its revenues now coming from its automotive fabrics business. Last year, automotive fabrics were Guilford’s only profitable product offering.
The balance of Guilford’s business is the Mexican apparel fabrics manufacturing operation. Over the past year, the company has closed all its U.S. apparel and home furnishings manufacturing, cutting its head count by more than 2,100. As of early this month, the mill employed about 3,800 workers, according to Emrich.
Guilford has $270 million in senior debt. Its primary lenders are Wachovia and Prudential. The filing would cut its debt to $145 million. Emrich said he expects the mill to emerge from bankruptcy by summer.
For the fiscal year ended Sept. 30, Guilford recorded a net loss of $160.8 million on sales of $643.5 million, which were down 21 percent from the prior year.
At the end of fiscal 2001, Guilford’s balance sheet showed $551.1 million in assets and $409.6 million in liabilities. Early this year, Guilford shares were dropped from the Big Board.
“Operationally, we have changed the company over the last two years,” he said. “Now we’re able, with our banks, to say, ‘We like this’ and ‘We like this company.’ They’re willing to forgive our debt and put it into equity.”
Hayes’ boisterous style has led to major clashes with other textile leaders — most notably, he’s been at loggerheads with Roger Milliken for much of the past decade. Bad blood over the NAFTA trade agreement, which Hayes supported and Milliken opposed, eventually led to Milliken splitting from the ATMI in 2000.
Still, Hayes said he has no regrets about his five decades in the industry.
“The most joyous part of my life has been my work life,” he said. “That’s what’s cost me three wives already.”
In retirement, he added, he may marry again.