Burlington Files Chapter 11 Plan Based On Berkshir

Greensboro, NC, Feb. 12--Burlington Industries has filed papers in its Chapter 11 case to further its deal with Berkshire Hathaway, although the move doesn't stop it from pursuing a competing proposal from W.L. Ross & Co., according to a filing with the Securities and Exchange Commission. Burlington Industries filed the proposed reorganization plan with the U.S. Bankruptcy Court in Wilmington, Delaware. The plan provides for Warren Buffett's Berkshire to acquire all of Burlington's equity in exchange for about $579 million in cash that will be used to pay off Burlington's creditors. The deal is subject to higher offers at an auction Burlington wants to hold April 21. Parties interested in participating in the auction would have until March 17 to sign a confidentiality agreement and provide proof of their financial ability to close a deal, and until April 14 to submit their bid. Bidders would have to top Berkshire's offer by $19 million, $14 million of which would cover a termination fee Berkshire could be entitled to if it's outbid. The proposed auction procedures, which are subject to court approval at a February 27 hearing, won't apply to W.L. Ross, according to the SEC filing. In the filing, Burlington said that its agreement with Berkshire allows it to continue to review and pursue a proposal from the private equity firm. As a result, the firm isn't required to participate in the auction procedures. W.L. Ross said that it had offered to provide financing to Burlington for a stand alone plan of reorganization. The plan would pay off in full administrative claims and $439 million of secured debt from cash on hand and from $250 million of new debt. About $300 million of bonds and other unsecured claims would have been exchanged for 57% of the reorganized company's stock and rights to subscribe for 43% of the stock for $85 million. W.L. Ross, which is owed $81 million in unsecured bonds and holds $7 million of Burlington's bank debt, lost out in its bid to purchase Burlington to Berkshire, whose deal will provide unsecured creditors with cash and other assets equal to about 35% of their claims, leaving Burlington virtually debt free. In a letter dated Wednesday, W.L. Ross head Wilbur L. Ross asked Burlington to reconsider its decision to go with the Berkshire bid, saying that there's still time "to avoid the litigation that will otherwise ensue." Ross said that holders of more than $120 million of unsecured claims wrote to him rejecting the 35% offer by Berkshire. "When you add their claims to the $81 million owned by funds under W.L. Ross & Co. management, you will see that a majority of your unsecured creditors oppose the Berkshire deal. "In view of the opposition of a majority of the true parties at interest, the unsecured creditors, and in view of the fact that there was no professionally organized M&A process conducted prior to your acceptance of the Buffet bid, there is no justification for the course of action you have adopted," Ross said in the letter to Burlington's board which was made public.

Related Topics:Shaw Industries Group, Inc.

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