NEW YORK — Citing the need to lighten a crushing debt load, Dan River Inc. filed for Chapter 11 bankruptcy Wednesday in Georgia’s Northern District court.
But company officials emphasized that they believed their fairly simple debt structure — $157 million worth of bonds with an effective rate of 14 percent — would allow for a brief period of court protection. They said in a statement they hoped the company would emerge from proceedings by the end of the year.
“The strength of our operations and our ability to generate positive cash flow distinguish Dan River from other companies in our industry that have gone through this process and failed,” chairman and chief executive officer Joseph Lanier said in a statement.
In a letter to employees, Lanier wrote, “Chapter 11 means reorganization, not liquidation.” The company said it had secured $145 million of debtor-in-possession financing to allow it to continue to operate while it restructures its debts.
Most of the major mills in the U.S. have been through bankruptcy during the past three years, with Burlington Industries, Cone Mills, Malden Mills, Guilford Mills and Galey & Lord all having filed for protection, but later emerged. A notable U.S. textile company that last year filed for bankruptcy and quickly liquidated was Pillowtex.
The Danville, Va.-based company’s petition showed $371.8 million in debts and $441.8 million in assets.
For the nine months ended Sept. 27 — the most recent period for which the company has filed financial results — Dan River recorded a $120.2 million net loss, which included a $91.7 million goodwill write-off and $20.8 million in interest expenses. A year earlier, the company had taken a $17.5 million loss.
Sales for the period were $262.2 million, off 20.3 percent, with apparel-fabrics sales coming in at $79.7 million, down 20.4 percent. The bulk of the company’s apparel-fabrics sales are for men’s wear and uniforms.
Lanier noted that the company has taken a variety of steps in recent years to cut its costs. In November, the company said it was closing two plants, which reduced its head count by 243 workers, to about 4,800.
According to court papers, the company’s leading creditors are HSBC Bank USA, with a $167.3 million claim, and SunTrust Bank, with a $3.3 million claim. No other creditor held a claim of $1 million or higher.
The company also petitioned for approval to name Woolard Harris as chief restructuring officer.