Pillowtex inks letter to sell Kannapolis, N.C., facility for $3 million plus note

By Jeff Pines

Washington, Oct. 12 - Pillowtex Corp. inked a letter of intent to sell its Kannapolis, N.C., plant for $3 million in cash plus a $1.5 million convertible promissory note to a limited liability company to be formed by Manchester Real Estate & Construction LLC, making the new company the stalking horse bidder for the property.

The convertible note will be converted at no charge into a one third interest in the limited liability company.

The 264-acre property includes 20 warehouse buildings, mills and a wastewater treatment facility.

The letter also requires Kannapolis, N.C.-based Pillowtex to use its best efforts to submit a reorganization plan that would give its unsecured creditors all of the reorganized company's common stock.

"The Manchester agreement is particularly attractive to the creditors' committee in that Pillowtex's ownership interest in the joint venture going forward allows for Pillowtex and its creditors, many of whom reside and work in the Kannapolis area, to share in the potential upside of any redevelopment project at the site," said Chip Stein, co-chair of Pillowtex's committee of unsecured creditors and vice president of Stein Fibers Ltd., in a news release.

Pillowtex, a home fashion textiles firm, has already filed the paperwork with the U.S. Bankruptcy Court for the District of Delaware. The company is asking for a $150,000 break-up fee and for the auction to be held Dec. 10.

Competing bids are due by Dec. 6.

Initial bids will start at $300,000 over the Manchester bid and subsequent bidding will be in $100,000 increments, if the court approves Pillowtex's proposed procedures.

An Oct. 19 hearing is scheduled.

Pillowtex filed for bankruptcy on July 30, 2003. Its Chapter 11 case number is 03-12339.

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