Kannapolis, NC, Aug 25--Pillowtex Corp., a maker of towels and bedding that closed all 16 of its plants, said on Monday that it has petitioned the bankruptcy court to address unpaid employee medical claims and keeping key employees.
Pillowtex filed a motion with the U.S. Bankruptcy Court in Wilmington, DE to contribute up to $2.5 million of Pillowtex assets to address payments associated with $5 million of unpaid medical claims that were made before the Chapter 11 filing.
The Fieldcrest-Cannon Foundation, which bears the name of two leading Pillowtex brands, intends to help with some of those costs, depending upon rules governing foundations, Pillowtex said.
Pillowtex is also seeking authority to negotiate with health-care providers to accept partial payment of claims as a settlement of the employee's account, the Kannapolis, NC company said in a statement.
By accepting the partial payment, the medical care provider would agree to not seek further collection from the employees that incurred the medical expense, the company said.
In the filing regarding key employee retention, Pillowtex said it applies to 143 salaried employees needed to maximize distributions to creditors and the payments under the plan would be in lieu of any payments that those employees would get under employment agreements and severance plans, Pillowtex said.
Pillowtex has identified 29 employees that are eligible for incentives under the key employee retention program, under which those payments will be based on the company's ability to make distributions of at least $168.5 million to creditors. The incentive payments will range from 4.2 weeks to 18.4 weeks of an employee's regular base salary.
The company estimates that retention payments could be up to $4.1 million and incentive payments could be up to $1.2 million, Pillowtex said.
On July 30, Pillowtex announced the closure of 16 textile manufacturing and distribution facilities and the termination of 6,450 salaried and hourly positions.
The company had emerged from bankruptcy in May 2002, but soft demand, foreign competition, overcapacity and weak pricing hurt the company's finances.
