CIT Group pushes back on W-C Designs’ request in bankruptcy court

-- Home Textiles Today, 9/15/2009 7:15:00 PM

Santa Anna, Calif. – CIT Group on Tuesday filed papers asking the bankruptcy court to deny W-C Designs’ request that the court allow the supplier, now operating in Chapter 11, to use funds claimed as cash collateral by the factor and W-C president Patrick McCullagh to run the company.

CIT also argued that under a previous agreement with the table linens and bedding supplier, CIT owns the accounts receivable W-C is claiming as cash collateral and thus, “collections of such accounts receivable do not constitute cash collateral” under the bankruptcy code.

In papers filed with the court, CIT characterized W-C Designs’ plan to find a buyer as a “Hail Mary” and noted the supplier’s filing states it is operating in a window of 90 days.

“Prior to the commencement of its bankruptcy case, [W-C] repeatedly assured CIT that it would be able to sell its assets. Despite its efforts, it was unable to accomplish a sale. There is no indication [W-C] can accomplish any sale during the pendency of this bankruptcy case,” CIT asserted in court documents.

The filing argues W-C is “highly unlikely” to sell at a price that will repay the more than $2.6 million CIT is owed, given that the supplier posted a $6 million operating loss last year.

In its Sept. 10 bankruptcy filing, W-C Designs asked the court for permission to tap the accounts receivable in the amount of approximately $1.5 million through Dec. 6 to keep the business going while it seeks a buyer. W-C asserted that even discounting its inventory and accounts receivable, CIT Group holds a loan cushion of 78%.

CIT today disputed that claim, stating in its filing that W-C’s post-petition collections would amount to no more than $562,500.

McCullagh over the weekend told HTT the company has a strategy and intends “to reorganize and go forward.”