Monday, April 18, 2005

WestPoint seeks auction

Westpoint Stevens Update

Source: By HTT

NEW YORK - A federal bankruptcy court judge is being asked to approve accelerated bidding and notice procedures for a sale of substantially all of WestPoint Stevens' assets in an auction that would be held June 21.

The auction would ostensibly pit Carl Icahn against a group led by Wilbur Ross, along with any other bidders WestPoint may attract in a shortened marketing effort. Ross offer most recently has been pegged at $632 million, while Icahn has stated his offer amounts to $800 million.

Judge Robert Drain signed the ex parte motion seeking the hearing last Friday. WestPoint filed it one day after a Thursday status conference that was closed to the public. WestPoint is seeking a seven-step process that would include a June 10 bidding deadline and a "purchaser selection hearing" June 22, a day after the auction. That would be followed by an amended Chapter 11 reorganization plan accounting for the sale. A final confirmation hearing would take place Aug. 17.

The process is intended to follow guidance given by the bankruptcy court about two weeks ago, when Drain denied a bid by WestPoint to name Wilbur Ross and the steering committee of first lien holders the stalking horse bidders with established breakup fees if the deal did not go through. That sale would have occurred within the context of a court-ordered section 363 sale of the company.

Instead, Drain advised the mill to attempt to complete the sale within a Chapter 11 plan of reorganization, essentially holding the auction first, then seeking confirmation of the plan by creditors. Company lawyers have stated that WestPoint had attempted at least four efforts at winning a confirmed reorganization plan but failed because of feuding creditors, notably the first tier group against Icahn, who holds first and second tier debt.

Under the current proposal, a modified Asset Purchase Agreement is being put forward by WestPoint instead of Ross. It contains no stalking horse and no breakup fees and contains the court's earlier suggestions. Instead of the stalking horse bid, the new procedures call for the "highest or best bid" to serve as the opening bid of the auction. No overbid amounts are specified.

If the process were to fail, the court could order a 363 sale and potentially have the option to "cramdown" the terms over the objections of one or more groups of creditors.