Quaker Fabric files Chapter 11 bankruptcy to liquidate assets, wind down operations

By Caroline Salls

Pittsburgh, Aug. 17 - Quaker Fabric Corp. filed Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of Delaware and has set the bid procedures for the proposed sale of substantially all of its assets.

According to court documents, increased domestic and foreign competition prompted a decline in sales, and the problems created by this revenue shortfall were exacerbated by higher energy and raw material prices.

The company began its annual two-week planned shutdown on June 29, and it did not have the financing needed to reopen, according to an 8-K filed with the Securities and Exchange Commission.

As a result, all but about 40 of the company's 930 employees were terminated on July 2, and the company announced that it would begin an orderly liquidation of its business and a sale of its assets.

Quaker Fabric said its liquidation is not expected to generate enough funds to make any payment to common stockholders.

Under the sale procedures, the $27 million stalking horse bid for Quaker's intellectual property, inventory, machinery and equipment and real estate was submitted by the Gordon Brothers Group, and the $2.6 million stalking horse bid for the company's Fall River, Mass., Bleachery Pond property was submitted by the Atlantis Charter School.

Neither purchase agreement requires the payment of a break-up fee, but, if Gordon Brothers is not the high bidder for the bulk assets it will receive $350,000 for expense reimbursement, and if the school is not the high bidder for the Bleachery Pond property, it will receive $25,000 for expense reimbursement.

All competing bids for all or a portion of the assets must be submitted by Sept. 10 and must include a deposit of 10% of the proposed purchase price.

Initial overbids for the bulk assets must be for at least $27.6 million and must be made in increments of at least $100,000 thereafter.

Initial overbids for the Bleachery Pond property must be for at least $2.65 million and must be made in increments of at least $25,000 thereafter.

In connection with the bankruptcy filing, the company has obtained a commitment for $1.65 million in debtor-in-possession financing from GB Merchant Partners LLC.

Interest on the DIP facility will be Libor plus 775 basis points.

The DIP facility will mature on Oct. 1.

Quaker Fabric will pay a $150,000 financing fee.

As of June 2, Quaker Fabrics had $155.24 million in assets and $60.41 million in debt.

The company's largest unsecured creditors include Unifi Manufacturing, Inc., Greensboro, N.C., with a $3.15 million trade claim and Hangzhou Zhongwang Fabric, Hangzhou, China, with a $1.29 million trade claim.

Quaker Fabric is a Fall River, Mass., designer, manufacturer and marketer of woven upholstery fabrics for residential furniture. Its Chapter 11 case number is 07-11146.

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