WORLDTEX LOOKING AT BANKRUPTCY
NEW YORK — In an effort to lessen its heavy debt loads, narrow-elastics maker Worldtex Inc. said Monday that it expects to file for bankruptcy.
If the company files for Chapter 11 court protection, it will be joining a growing group of textile concerns that have succumbed to heavy debt loads in recent months. Other firms currently restructuring include knitters Dyersburg Inc. and Glenoit Corp.
Worldtex, based in Hickory, N.C., said it has reached an agreement with two-thirds of its bondholders in which the company would cancel its $185 million in 9.6 percent senior notes in exchange for giving its bondholders a 98 percent equity stake in the company and $30 million in payment-in-kind stock. Its existing 14.3 million shares, which trade over the counter, would then be canceled and replaced with a 2 percent equity stake and warrants to buy another 10 percent of the firm’s common shares.
Worldtex shares closed Monday at 5 cents. The company’s stock has traded at extremely low levels over the past year, leading to it’s delisting from the New York Stock Exchange in October.
Even before then, its shares were so low that an investment group called EGS Partners was able to take a 34.3 percent stake in the firm in early 2000, triggering its poison pill. The company eventually reached a standstill agreement with the group, which reported in a recent filing with the Securities and Exchange Commission that it had sold off all its Worldtex holdings.
Worldtex said the Chapter 11 filing — expected in the next six weeks — should reduce its total debt from $201.6 million to about $26.6 million. The firm also said it would reduce its annual interest payments by about $16.9 million.
Barry Setzer, chairman and chief executive officer, said in a statement that the restructuring plan was the result “of over four months of discussions” with the company’s bondholders. The company also said the plan would allow it to continue paying trade creditors in full.