Galey & Lord term loan agent BNY Asset Solutions objects to bidding procedures

By Jeff Pines

Washington, Sept. 9 - Galey & Lord Inc.'s term loan agent, BNY Asset Solutions LLC, objected to the Galey & Lord's proposed bidding and sale procedures.

On Wednesday, BNY withdrew its emergency request to delay the hearing so it would have more time to interview a Patriarch Partners LLC principal. It filed this objection with the U.S. Bankruptcy Court for the Northern District of Georgia Thursday.

The term loan lenders are the company's single biggest creditor. Galey & Lord, a textile firm, owes them $129 million plus interest, fees, costs and expenses.

BNY objects to the company's terms that bidders bid on all of the company's assets rather than have the opportunity to bid on pieces of the pie. It attributed this requirement to Patriarch, the stalking horse bidder, the company's largest shareholder, a term loan lender and a debtor-in-possession facility lender.

Patriarch's requirement for a $4.5 million termination fee and a $20 million deposit for other bidders will scare other interested parties away, the term loan agent said.

BNY also wanted the court to know that Patriarch "is so sure of its bid that it made its offer without doing one dollar's worth of due diligence, without prior discussion with the debtors' financial advisors and without review with the debtors of their profit forecasts or asset values in order to develop its own going-forward business plan."

In the filing, BNY alleged Galey & Lord chief financial officer James Murray and Lynn Tilton, a Patriarch principal, communicated with each other that they should try to keep Wilbur Ross out of the bidding.

Ross won court-approved auctions for two other bankrupt textile firms: Cone Mills Corp. and Burlington Industries.

"Instead of finding ways to ensure that there would be competitive bidding, the debtors, through their CFO, engaged in improper negotiations with Patriarch to freeze out one of the two real bidders the debtors knew would bid," BNY said.

It wants the court to reject Galey & Lord's proposed bidding and sale procedures.

Galey & Lord filed for bankruptcy on Aug. 19. Its Chapter 11 case number is 04-43098.

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