Eden, NC, Aug. 29--U.S. Bankruptcy Court on Thursday approved Pillowtex's bid to sell off all its plants, equipment and brand names for at least $56 million at an Oct. 2 auction.
Judge Peter Walsh accepted an opening minimum bid of $56 million for all Pillowtex assets from GGST LLC, a consortium of four companies that deal in retail liquidation, at a hearing in Wilmington, DE. The ruling brings the bankrupt textile giant one step closer to its demise.
Other companies may place higher bids at the property auction, and two--Welspun India Ltd. and British-based Broome & Wellington--have expressed an interest in at least some Pillowtex assets. An attorney for Broome & Wellington said he expects a "spirited" auction.
Competing bids for the company must be at least $2.54 million higher than the GGST bid, said Steve Yoder, an attorney representing Broome & Wellington.
Despite Pillowtex's original proposal, Walsh allowed companies to bid on Pillowtex property individually rather than buying the entire company, Yoder said. The winning bid or bids are subject to court approval at an Oct. 7 hearing.
Pillowtex closed 16 plants July 30 and laid off 7,650 workers, 4,800 in North Carolina. It was the largest layoff in state history.
When it closed, Pillowtex announced its intentions to liquidate and sell nearly all its assets to GGST, subject to court approval.
The court ruled Thursday that GGST will receive a fee of $1.54 million if it is not the winning bidder. That's a reduction from the $2.25 million fee proposed by Pillowtex and GGST, which other potential buyers argued was too large.
"This is a very difficult case," Walsh said. "You're coming in with not just a free-fall Chapter 11 but one destined for immediate liquidation."
Walsh did not rule Thursday on a Pillowtex plan to pay 143 top-tier executives more than $4.1 million in incentives or on a plan to pay $2.5 million in unpaid employee medical claims. Hearings will be held on those issues next month.
Former Pillowtex workers did receive some good news on Thursday when Blue Cross and Blue Shield of North Carolina and Arizona-based ScriptSave announced they would send discount prescription drug cards to former Pillowtex employees in North Carolina.
The towel-and-sheet maker was self-insured, paying the medical bills of its employees. Since the bankruptcy, refilling prescriptions has emerged as one of Pillowtex workers' leading concerns.
The cards, which bring average discounts of about 20%, are expected to arrive at workers' homes next week, said Ron Smith, director of corporate pharmacy at Blue Cross.
Paying for prescription drugs has emerged as a major problem for many former employees, many of whom are in their 50s and 60s. The average age of Pillowtex workers in North Carolina is 46.
"This will help a whole lot," said Deborah Pinnix, 47, who had cut her insulin dosage in half after she was laid off and could no longer afford her medicine.
The cards can be used by any member of the household to purchase brand-name or generic medicine.
Since the bankruptcy filing, Blue Cross has been selling Pillowtex workers short-term catastrophic coverage that does not include prescription coverage.
Blue Cross is also working with the state to offer federally subsidized, comprehensive coverage that covers prescriptions, beginning Oct. 1. To date, about 950 workers have signed up for the subsidized insurance.
Asked whether Blue Cross would provide similar discounts to workers laid off from other textile companies, Smith said the company would consider them on a case-by-case basis.
