Pillowtex reorganization plan gives most stock to bank lenders

New York, Dec. 31 - Pillowtex Corp. filed a reorganization plan with the U.S. Bankruptcy Court in Delaware that gives the vast majority of common stock to secured creditors and a combination of stock and warrants to unsecured creditors. Existing common and preferred stock will be canceled and holders will receive no distribution.

The Kannapolis, N.C. household textiles company said that under the plan it will emerge from bankruptcy with around $200 million of debt compared to $1.1 billion when it filed for Chapter 11 on Nov.14, 2000.

"The filing of our Plan of Reorganization represents a significant step toward successfully reorganizing our Company and is an important milestone in our financial restructuring," said Pillowtex president Tony Williams in a filing with the Securities and Exchange Commission. "We are confident that the reorganization structure and program outlined in the Plan lays a strong foundation for our Company's future success.

"Our strategy going forward is to improve our position in the highly competitive industry of home fashions," Williams added. "Our business plan focuses on four broad initiatives - branding and marketing, capacity rationalization, strategic sourcing and total quality management. Our objective is to be the undisputed leader in customer service."

During reorganization, Pillowtex said it examined operations and made changes to improve processes, increase profitability and enhance customer service.

As part of the restructuring, Pillowtex will reincorporate in Delaware instead of Texas.

Before creditors vote on the plan, the disclosure statement must be approved by the bankruptcy court.

Under the plan, claims will be treated as follows (the reorganized company is valued at $400 million, including its debt):

--Industrial revenue bonds totaling $11.959 million will be reinstated with 100% recovery. These include Fieldcrest Cannon, Inc.'s $10 million of taxable bonds issued by the Alabama Industrial Development Authority, $4.6 million of revenue bonds issued by the Mississippi Business Finance Corp. and $5.3 million of Silverson-Hanover Corp. revenue bonds issued by the Pennsylvania Economic Development Financing Authority.

--Bank loans with a claim totaling $425.95 million. Holders will receive 9,015,000 shares of new common stock for a recovery of 46.8%. The stock is equivalent to 96.1% of the equity or 76.6% on a fully diluted basis;

--Unsecured claims totaling $532.33 million, including: Pillowtex's $185 million 9% senior subordinated notes due 2007, Pillowtex's $125 million 10% senior subordinated notes due 2006, Fieldcrest Cannon's $125 million 6% convertible subordinated debentures due 2012, Fieldcrest Cannon's $5.2 million 6% debenture promissory notes, Pillowtex's unsecured overline facility with Bank of America that had $34.7 million outstanding, and an aircraft lease with Fleet National Bank. Holders in this category will receive 234,500 shares of new common stock and warrants to purchase 1,764,706 shares for an estimated recovery of 1%, excluding the value of the warrants. The stock is equivalent to 2.5% of the equity or 2% on a fully diluted basis while the warrants are equivalent to 15% of the fully diluted equity. The will have an exercise price of $61.00 and will expire after 90 months.

--Preferred stock totaling $65 million. Holders receive nothing

--Common stockholders receive nothing

Pillowtex will also issue 150,000 shares to key employees and create options for 620,000 shares under a new equity incentive plan.

To finance its ongoing operations, Pillowtex expects to obtain $350 million of exit financing from lenders with Bank of America as administrative agent. The facility will likely be a senior secured revolving credit facility for $200 million, including a letter of credit sub-facility, and a $150 million term loan.

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