WestPoint Stevens' steering committee's sale stay request denied effective Aug. 5

By Caroline Salls

Pittsburgh, July 26 - WestPoint Stevens, Inc.'s steering committee of first-lien lenders' request for a stay of the company's $703 million asset sale to Textile Co. Inc. pending the committee's appeal was denied, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

However, the order denying the stay will not take effect until Aug. 5 in order to give the committee the opportunity to renew its request for a stay of the distribution of some sale proceeds and/or request a stay from the U.S. District Court for the Southern District of New York.

The committee is comprised of first-lien lenders Contrarian Funds, LLC; Satellite Senior Income Fund, LLC; CP Capital Investments, LLC; Wayland Distressed Opportunities Fund I-B, LLC; and Wayland Distressed Opportunities Fund IC, LLC.

In its stay motion, the committee said it believes it has a "substantial possibility" of success in its appeal based on the following issues:

*The court erred in concluding that any distribution can be made under the sale agreement to second-lien lenders before repayment in full in cash of first-lien lenders;

*The intercreditor agreement does not permit a distribution to second-lien lenders before first-lien lenders are paid in full in cash;

*The court erred in concluding that competing bids for the assets could be made in a form other than cash; and

*The court erred in authorizing WestPoint Stevens to transfer non-cash collateral directly to first-lien lenders rather than the first-lien collateral trustee, who is subject to the direction of a majority of the first-lien lenders.

Under the purchase agreement, Textile will pay $703 million, including $187 million for the direct purchase by Textile parent American Real Estate Holding LP of 17.5% of the newly issued shares of the company.

The first-lien lenders will receive 35% of the new company's shares, and the first-lien lenders and second-lien lenders will receive the right to acquire up to an additional 47.5% of the shares for $125 million.

Also under the agreement, the purchase price will include payment in full of all outstanding debt under WestPoint's debtor-in-possession credit agreement, the satisfaction of all other secured claims, the assumption of other liabilities and payment of $3 million in wind-down costs.

WestPoint Stevens, a West Point, Ga.-based textile company, filed for bankruptcy on June 1, 2003. Its Chapter 11 case number is 03-13532.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.