Banks give Pillowtex 10 days to reach a solution

By Staff -- Home Textiles Today, 7/1/2003 12:00:00 AM

Kannapolis, NC — Buying time — exactly 10 days — to find a buyer or raise cash, Pillowtex this morning said its bank lenders have cut a deal with the embattled textiles producer, agreeing not to call the company's loans, or take action to recover on them, before July 11.

After that date, though, the major mill's fate hangs in the balance as lenders figure out what to do next with a textiles producer that's running out of cash and which couldn't make a principal and interest payment due June 30.

Even after emerging from bankruptcy, Pillowtex remained deeply in debt, losing money and watching its sales dry up in a difficult sales environment, a situation only complicated by mounting retail skepticism about the company's future prospects.

In addition to missing the June 30 principal and interest payment on its term loan, the company said it notified its term loan lenders that "it did not believe that it would be able to comply with the interest coverage ration and leverage ration covenants contained in the term loan agreement for the fiscal quarter ended June 28, 2003."

In the meantime, the company said it is "continuing to work with its term loan lenders and revolving loan lenders in reviewing its strategic alternatives."