Countdown to Pillowtex sell-off

NEW YORK — By just about this time next month, Pillowtex's dismantling will be ready to begin in earnest, if everything goes according to plans filed with the U.S. bankruptcy court.

Those proposals, still subject to an Aug. 20 hearing, call for the adoption of an asset purchase agreement with GGST LLC unless a bidding process and auction result in other qualified and successful suitors for what's left of Pillowtex.

GGST has offered $56 million in cash for assets consisting mostly of Pillowtex's intellectual properties, equipment, contracts and designation rights. The deal is still subject to adjustments in price and assets, and doesn't assume significant liabilities, according to papers filed with the U.S. Bankruptcy Court for the District of Delaware.

The plan also excludes the sale of existing inventory — valued at $164.3 million as of the filing — finished goods currently in the process of being shipped or sold off. It also excludes cash, accounts receivable — valued at $120.4 million — and real property.

GGST is a joint venture for the Pillowtex liquidation formed by SB Capital, Gordon Brothers International, Gibbs International and Tiger Capital — companies generally specializing in liquidations, asset utilization, and investor and brand management.

Voluminous court papers provided the best insight into the process. Current and former Pillowtex executives, representatives of GGST and their attorneys have either declined to be interviewed or been unavailable for this article.

The schedule is tight, given the amount of work to be done in a compressed time period. As it's currently contemplated, any additional suitors must submit their bids for the company's assets by 4:00 p.m., Sept. 4. Those bids will then be reviewed by Pillowtex and GGST prior to a scheduled September 10 auction in New York. Finally, the outcome of that auction, if there is one, or acceptance of GGST's agreement, will be ruled on by the bankruptcy court in Wilmington, DE, on Sept. 12.

Whether other bidders will emerge remains to be seen; time and qualifying requirements for competitors by circumstance and intent will limit all but the most dedicated. The GGST asset purchase agreement already accepted by Pillowtex, along with pending court motions, establish rigid requirements, among them:

• A requirement for the bidder to submit full financial statements showing its ability to complete the sale and ownership disclosures. In order to obtain due diligence information, bidders have to supply information on the anticipated price range, structure and financing of the deal, sources of financing, and conditions it may impose. The bidder must also provide Pillowtex the ability to conduct due diligence about itself.
• The bid must be an irrevocable offer submitted with up to 15 percent of the purchase price delivered by certified or bank check, wire transfer or letter of credit as a deposit.
• Bidders must also successfully outbid GGST by at least $1 million, plus GGST's $1.75 million break up fee and up to $500,000 in expenses. That means a minimum successful bid now would have to be at least $59.25 million.

But terms of the larger bid would have to be considered at least on a par with those of GGST.