New York, NY, Aug. 1--If anything of substantial value remains at now-bankrupt Pillowtex Corp., it's the textile maker's brands.
Names including Royal Velvet, Charisma and Cannon, which have tagged towels, sheets and other fabrics in U.S. households for decades, are expected to be licensed out to various suppliers and retailers by a group of investors and liquidators in the wake of Pillowtex's Wednesday bankruptcy filing.
In one of the most dramatic defeats the ailing U.S. textile industry has seen in recent years amid competition from lower-cost manufacturers overseas, the 100-year-old, Kannapolis, NC, company darkened nearly six million square feet of manufacturing space this week and fired 6,450 workers.
Pillowtex said in a Wednesday statement that it has signed an agreement with a group of four companies to sell "substantially all of its plants, equipment and brands." The purchase price was $56 million, according to court documents cited by news reports.
That may seem a paltry sum for a company that had $935 million in revenue last year. But if the company's working capital, inventory and receivables far exceed that figure, the cost of disposing of Pillowtex's giant, empty manufacturing facilities will eat up most of that cash, industry experts say.
Buyer GGST LLC is a group formed by Gordon Brothers Retail Partners, Gibbs International, SB Capital Group and Tiger Capital Group. The four firms, which specialize in liquidating inventory and hard assets, including big textile looms, will likely attempt to lease out the company's massive manufacturing campus as warehouse or office space, if prior textile-mill liquidations are any indication.
In addition, GGST has hired Group 3 Design, a New York brand-management firm, to manage brand-licensing activities. Neither of the companies immediately returned phone calls requesting comment, but the firms are likely to pursue licensing agreements with the retailers that currently stock their shelves with Pillowtex merchandise, says says Thomas J. Lewis, an analyst at C.L. King & Associates, a New York investment firm.
Under such arrangements, big retail companies would likely manufacture the Pillowtex brands themselves in cooperation with overseas factories. In such arrangements, license owners typically supervise the quality of manufacturing.
There is a possibility, however, that the brands could still attract bidders other than GGST during a 45-day auction period that just began, Lewis says.
"I can't quite close the door on other bidders," says Lewis, noting that competitors Springs Industries--a larger, privately held textile maker in Fort Mill, SC--and Westpoint Stevens had reportedly made bids on the brands in recent months. While Westpoint Stevens itself is in bankruptcy, Lewis notes that the company's "control has passed to some pretty deep pockets." Westpoint's influential creditors include Connecticut hedge-fund magnate and Kmart Holding Corp. Chairman Edward S. Lampert, who has bought up a huge chunk of Westpoint's distressed debt. Neither Westpoint nor Springs immediately returned phone calls seeking comment.
For decades, Royal Velvet in particular "was a very strong brand," Lewis adds. "It was something that got people into a department stores, and the retailers valued that."
Textile maker Glenoit Corp., which currently has a brand-licensing agreement with Pillowtex worth "several million dollars," will seek to extend its licensed production of bath furnishings including shower curtains, rugs, soap dishes, and towels under the Royal Velvet, Cannon and Fieldcrest brands, says Barry Leonard, president and CEO of Glenoit's home-fashions division.
"Consumers are more educated than they've ever been on quality, and are always looking for a great-quality product," Leonard says. "You've got to assume that Pillowtex's competitors see value in the brand."
