Time's up for P'tex to pay up

KANNAPOLIS, NC — Pillowtex had until today to come up with cash or find a white knight to save the company, after its lenders late last week granted it a second lifeline to come into compliance with loan covenants currently in default.

After Pillowtex — the nation's third-largest home fashions supplier — missed a June 30 payment for both principal and interest due on its debt, lenders cut the company some slack and initially agreed not to call the loans, or take action to recover on them, through last Thursday.

With the deadline only hours away, the banks extended the deadline again, giving the company through the weekend to put some kind of deal together to stave off another bankruptcy, the second in as many years, and the very real threat of liquidation.

In addition to missing the June 30 payment, Pillowtex earlier told creditors that "it did not believe that it would be able to comply with the interest coverage ratio and leverage ratio covenants contained in the term-loan agreement for the fiscal quarter ended June 28, 2003." That sent out a signal that the company is running short of cash and is likely generating an operating loss.

Trying to hoard its dwindling cash reserves, the company continued to furlough its blue-collar workers, keeping its plants on an extended shutdown last week following its regular two-week summer vacation closing.

The company said it's still trying to come up with some solution to its problems, "and is continuing to work with its term loan and revolving loan lenders in reviewing its strategic alternatives."