Propex Gets New Owner for $82 Million in Auction

Chattanooga, TN, March 25, 2009--The world’s biggest independent maker of carpet backings will get a new financial backer next month, according to the Chattanooga Times Free Press.

Minnesota investment firm Wayzata Investment Partners agreed Tuesday to pay $82 million to buy the assets of the bankrupt Propex Inc. It outbid two rival investment firms during an all-night auction in Atlanta.

The buyers plan to complete the purchase in April and will maintain most of Propex’s staff and business operations, attorney Henry Kaim said in a bankruptcy hearing late Tuesday.

“They are going to continue to operate the company as a going concern and continue to do business,” said Kaim, a Houston attorney who represented Propex in the bankruptcy auction.

Propex has operated for the past year in a Chapter 11 reorganization plan under federal court protection. Since filing for bankruptcy in January 2008, the Chattanooga company has lost more than $84 million, according to financial reports filed with bankruptcy court in Chattanooga.

The Chattanooga company, which includes part of the former SI Corp. and Amoco BP, employs nearly 2,500 workers, including about 550 in the Chattanooga area.

Industry analysts said Propex has suffered from the downturn in both the carpet and construction industries.

Since filing for bankruptcy last year, Wayzata provided debtor financing to sustain Propex operations. In the past year, Propex’s top officers, including company president Joe Dana and executive vice president Mac Bridger, left the company. Propex is now headed by Woody McGee, who formerly worked to restructure companies for Cerberus Capital Management L.P.

Wayzata emerged as the winning bidder over two other investment firms: the New York-based Renco Group, Inc., and Black Diamond Capital Management LLC, based in Lake Forest, Ill.

In a round of 95 bids during an auction that stretched over 15 hours, Wayzata’s $82 million cash offer ultimately topped the next best bid from Black Diamond by $1 million.

Under a proposed motion for the Propex sale, Black Diamond is designated as the backup bidder for the company should Wayzata be unable to close the deal.

U.S. Bankruptcy Court Judge John Cook, who still must ultimately approve the final sale to Wayzata, said the length of the bankruptcy auction was unprecedented for any case in his court.

“I’ve been on the bench for 20 years and I’ve not heard of one that went that long,” he said.

(See the FloorDaily interview for March 26 concerning the Propex developments.)