Judge Throws Out Breakup Fee In Burlington Deal

GREENSBORO, NC, Aug. 1--A bankruptcy judge on Thursday threw out a $6.08 million breakup fee that was part of the bid by investment firm W.L. Ross Inc. LLC to buy bankrupt Burlington Industries, forcing a renegotiation. The decision by U.S. Bankruptcy Court Judge Randall Newsome in Wilmington, DE, means Ross won't collect the fee if Burlington's reorganization plan is rejected and his bid to buy the company fails. Ross attorney Lewis Kruger told Newsome the ruling "could be a problem," the News & Record of Greensboro, NC, reported. Newsome ruled that Ross could acquire the textile maker for $614 million. Ross had bid $620.08 million. "Discussions are ongoing," Burlington spokeswoman Delores Sides said late Thursday. Newsome ordered Burlington and Ross to return with a bid that does not have a breakup fee. He did not immediately schedule a new hearing date. The final purchase price is subject to adjustments, including a $28.6 million price reduction that Newsome approved to cover $44 million worth of underfunded pension liabilities W.L. Ross is assuming with the sale. During the Thursday hearing, Oaktree Capital Management LLC was identified as the only other bidder during Monday's auction for Burlington. Oaktree bid $617 million for Burlington, forcing Ross to increase his opening bid of $608 million. Wilbur Ross Jr., who owns the investment firm, hopes to complete his acquisition of Greensboro-based Burlington in October and bring it out of bankruptcy as a private company with little or no debt. Burlington owes about $680 million. As part of his bid, Ross agreed to sell the Lees carpet division to carpet maker Mohawk Industries of Calhoun, GA for $352 million. Lees is Burlington's most profitable business. Ross has said he would attempt to keep the rest of the company intact. The auction for Burlington Industries took place after a proposed $579 million sale to Warren Buffet's Berkshire Hathaway Inc. fell through in February. Burlington Industries filed for bankruptcy protection in November 2001, listing assets of $1.2 billion and liabilities of $1.1 billion. Since it declared bankruptcy, Burlington has trimmed its work force from 13,500 to about 7,000 in hopes of returning a profit. Burlington was once the world's largest textile company with 80,000 employees and 149 plants.

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