• Jennifer Marks

WPS to Emerge in March

Reorganization Plan Would Wipe Out $2.15 Billion in Debt

West Point, Ga. — WestPoint Stevens has filed its plan of reorganization and is looking to emerge from bankruptcy in late March. The plan is a debt-for-equity swap that wipes out some $2.15 billion in outstanding debt and awards ownership of more than 86 percent of the company's new common stock to first and second lien holders — a group that includes high-profile financial engineer Carl Icahn.

Icahn's company, Icahn Associates, will have two seats on the five-man board of directors following the company's emergence from bankruptcy, according to the Disclosure Statement WestPoint filed Jan. 20 with the Bankruptcy Court for the Southern District of New York. M.L. “Chip” Fontenot will remain the company's CEO.

“The company would emerge debt-free, with the exception of exit financing to cover working capital needs,” said Lorraine Miller, senior vice president, finance and external communications.

WestPoint has an exit facility to fund up to $300 million, but Miller said it will probably need to tap only about half that amount.

The plan also projects a revenue decline this year of roughly $300 million, for a 2005 sales target of $1.32 billion. WestPoint is planning to walk away from business this year to focus on profitability, Miller said.

“The reality is not about the top line, it's about the bottom line,” she added.

By 2009, the plan projects annual sales of $1.52 billion and net income of $61.8 million.

The Disclosure Statement also touches upon the mill's need to further develop its overseas sourcing capabilities and its rationalization of operations in the United States. Miller said WestPoint will accomplish the former by leveraging its six-month-old Asian sourcing office in Shanghai and may also pursue joint ventures or direct investment opportunities.

The Disclosure Statement does not outline additional plant closings, but notes that should the company decide to step up the pace of domestic rationalization and foreign expansion, it would require a near-term equity investment of $200 million. It currently operates roughly 30 facilities, including subsidiaries, and employs roughly 10,650 hourly wage employees, according to the court document.

WestPoint plans to ask the court to terminate its obligation to the Pension Benefit Guarantee Corp., according to the Disclosure Statement. The company estimates $173 million in unfunded benefit liabilities and minimum pension funding requirements over the next five years of $126.8 million. As of Dec. 31, 2004, WestPoint stopped accruing benefits in the fund and froze existing accrued benefits.

Despite some discussion early in the bankruptcy process about emerging as a privately held concern, WestPoint Stevens plans to remain a public company, Miller said.

“The company is going to make its best effort to operate as a publicly traded company with shares traded on a national exchange,” she said.

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