Kannapolis, NC, June 20--Pillowtex Corp. a maker of sheets and towels which emerged from bankruptcy protection 13 months ago, is close to being bought by UK-based Homestead Fabrics Ltd. in a $300 million deal, a source familiar with the situation said on Thursday.
The deal still has not gained approval from Pillowtex's bank lenders, Wachovia Corp. and Bank of America Corp. and may fall apart, the source said.
If a buyout agreement is not reached, that would likely send Kannapolis, North Carolina-based Pillowtex back into chapter 11 bankruptcy protection within a few days, the source said.
"There is a deal that's on the table from Homestead Fabrics," the source said, speaking on condition of anonymity. "Homestead has been working towards a deal for the last three weeks but for the most part, we can't get the (creditors) to decide on the deal."
Pillowtex has been looking for a buyer since late last year and currently has about $200 million in debt. It has had trouble servicing its debt payments however, as it struggles with heavy competition from cheap imports in the depressed textile industry.
Pillowtex, which supplies sheets, towels and other household items to retailers such as Wal-Mart Stores Inc. and Kohl's Corp., reported $934.9 million in overall sales last year.
Homestead does about $100 million in annual sales in the United States, and would increase its presence in the U.S. market by acquiring Pillowtex.
Officials at Pillowtex could not immediately be reached for comment. A U.S. spokesman for Homestead was not immediately available. A spokeswoman for Wachovia declined to comment and Bank of America representatives were not available.
Pillowtex last month said its audit committee asked it to review how it accounts for discounts and rebates used to promote its products and said it might report an additional $2 million loss.
In that announcement, the company said it lost $69.2 million in the five months ended June 1, 2002, and $27.6 million in the seven months ended Dec. 28, 2002.
The source said WestPoint Stevens Inc., a textile maker which filed for bankruptcy earlier this month, and rival Springs Industries were also considering buying Pillowtex.
WestPoint's troubles became an impediment, however, and union leaders' concerns combined with financial pressures at Springs caused that company to back out in mid-May, the source said.
Union leaders representing Pillowtex's 7,000 employees brought in buyout firm Cerberus Capital Management but Cerberus was never really serious about a bid, according to the source.
"Cerberus was never real," the source said. "They never really wanted to buy the company. They were just appeasing the union for the most part."
