WARNACO SEEKS 120-DAY EXTENSION
Byline: Vicki M. Young
NEW YORK — Bankrupt Warnaco Group Inc., which expects to complete its business review next month, is seeking court approval of a 120-day extension of its exclusive right to file a plan of reorganization.
If Manhattan bankruptcy court gives the OK on Oct. 18, Warnaco would have until Feb. 6 to file a plan. The current exclusivity period ends on Oct. 18.
Kelly A. Cornish of Sidley Austin Brown & Wood, Warnaco’s bankruptcy counsel, said in court papers that the company has identified four business units that the intimate apparel and sportswear maker is considering selling.
As reported, the company obtained a $600 million debtor-in-possession financing facility. According to court documents, as of Sept. 30, Warnaco had $165 million in borrowings; $66.3 million in trade letters of credit and $2.5 million in standby letters of credit outstanding under the facility.
Since voluntarily filing for Chapter 11 bankruptcy court protection on June 11, the company has evaluated more than 250 real-property leases and rejected upwards of 30 leases, for an annual savings of $5 million. In other cost-cutting efforts, the company said in court documents that the rejection of two aircraft leases and related expenses shaved $6.1 million in expenses, while another $25.9 million in savings resulted from general corporate expense reductions. Since June, the company also sold a distribution facility in Stratford, Conn., for $4.5 million.
Warnaco, however, will be seeking bankruptcy court approval on Oct. 18 of a key employee-retention program that has a potential cost of $28.5 million.
Also before the court will be a request by Warnaco to reject an agreement with Fruit of the Loom, which is also bankrupt. The parties earlier in the year were involved in a dispute over the ending of the Warnaco/FTL license, but reached a settlement in which Warnaco could sell inventory bearing FTL trademarks for a limited amount of time. Warnaco said that as of Oct. 4 it has disposed of almost all of the inventory and has made all payments required under the settlement agreement except for a $1.2 million payment that was due on Oct. 1.
Court approval of the rejection request would mean that Warnaco would not have to make the Oct. 1 payment to FTL.