Galey & Lord, Patriarch Partners rebut term loan agent's objection to bidding procedures

By Jeff Pines

Washington, Sept. 13 - Galey & Lord Inc. and Patriarch Partners LLC, the stalking horse bidder for the firm, asked the U.S. Bankruptcy Court for the Northern District of Georgia to deny an objection from the company's term loan agent over the proposed auction procedures for Galey & Lord.

Contrary to what term loan agent BNY Asset Solutions LLC argued, Galey & Lord said it believes the best way to sell the company is as one piece and not piecemeal.

The company's management said it believes that if the company is sold in pieces rather than as a whole, it would lead to Galey & Lord's customers placing orders elsewhere, the company's suppliers diverting supplies to others and employees looking for work elsewhere. Such a development could lead to the company's demise, it said.

In Patriarch's response, it said, "Given the term lenders' stated desire to break apart and liquidate the debtors, there is and has been great concern that the term lenders would contact such competitors and engineer a sale process designed to achieve the liquidation they covet.

"It is therefore no surprise that the term lenders now embrace a strategy that seeks to open the bidding procedures in a manner that would allow the debtors' largest competitors, at the risk of only a small deposit, to obtain confidential information and bid for the debtors' assets knowing that the desired result - a liquidation - is best achieved by not closing the transaction."

Patriarch said it will walk away from the sale if the bidding procedures are altered.

As for not giving any other potential bidder time to conduct due diligence, Galey & Lord said, the company has been on the market for two years and a 30-day delay requested by BNY Asset Solutions could lead to Patriarch walking away from the auction.

Both Galey & Lord and Patriarch believe the proposed $4.5 million break-up fee at 2.5% of the proposed price is reasonable and well within the limits approved by bankruptcy courts.

Galey & Lord also said it is prepared to give BNY Asset Solutions some consultation rights on discretionary matters.

Patriarch also made it clear it has no designee on Galey & Lord's board of directors. As a member of the company's steering committee, it did recommend Larry Himes, who was put on the slate for the board. The term loan lenders accepted the slate. Himes is not now nor has he ever been a Patriarch employee and he is not Patriarch's designee on the board, Patriarch said.

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

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