WestPoint sale to be appealed

By Staff -- Home Textiles Today, 7/13/2005 12:06:00 PM

NEW YORK — The Steering Committee of first-lien lenders in the WestPoint Stevens bankruptcy case has filed a notice of appeal seeking to overturn last week’s order awarding the mill’s assets to Carl Icahn.

The notice and accompanying documents claim five specific errors of law in the decision rendered by U.S. Bankruptcy Court Judge Robert Drain, when he determined that Icahn’s $703.6 million bid trumped competing offers from Wilbur Ross and the Steering Committee.

Among other things, the Steering Committee is arguing that Icahn’s bid failed to provide adequate protection for the first-lien lenders because it did not provide for payment in full and in cash. Icahn’s buyout agreement proposes to pay down the secured debt with a combination of cash and stock in the new company. The committee also complained that the order permits payment to second-tier lenders in violation of the Intercreditor Agreement previously in effect.

The appeals notice, however, did not immediately seek a stay of Drain’s ruling that potentially might block Icahn from closing on the sale. Steering Committee attorney Bruce Bennett declined comment on the appeal. Moreover, the mere notice of an appeal does not necessarily mean it will be accepted by the Circuit Court of Appeals.

The Steering Committee is composed of hedge funds and distressed debt funds, including CP Capital Investments, Satellite Senior Income Funds, Contrarian Funds and Wayland Distressed Debt Funds.

Even if it is accepted by the appeals court, the arguments in the appeal could become moot if the sale order is not stayed. And even if the Steering Committee seeks to block the closing, it will have an uphill battle, since it would undoubtedly be argued by the mill and Icahn that halting the asset sale would endanger the company’s ability to operate moving forward.

Attorneys for WestPoint and Icahn could not immediately be reached.