West Point, GA, June 2--WestPoint Stevens Inc. filed for protection from its creditors in federal bankruptcy court, joining the raft of textile makers forced to restructure because of overseas competition and excessive debt.
In a meeting Sunday afternoon, the company's board accepted the resignation of Holcombe T. Green Jr., WestPoint's high-profile chairman and chief executive, people familiar with the matter say. Green's departure is part of an agreement in principal with a majority of bondholders that calls for full ownership of the restructured company to go to bondholders, according to someone familiar with the plan.
The West Point, Ga., company, which traces its roots to the 19th century, has been financially ailing for months and had been laboring to strike a pact with its lenders to stave off a bankruptcy filing. One of the nation's largest makers of sheets and towels, it has been hit with declining sales while staggering under $1.8 billion of debt.
The Chapter 11 filing, made electronically in Manhattan federal court, represents the old-line firm's second trip to federal bankruptcy court in 11 years, joining Malden Mills Industries Inc. as one of the beleaguered industry's two-time failures. During the past two years, textile makers Guilford Mills Inc. and Burlington Industries Inc. also have resorted to Chapter 11 filings to restructure their debts.
The American textile industry has been struggling to contend with an onslaught of low-priced imports, while facing vexing questions about how much production to move offshore and how much to spend to modernize aging U.S. plants. WestPoint, which makes bed linens, towels, blankets, comforters under brand names such as Martex, Ralph Lauren, Martha Stewart and Joe Boxer, took on considerable debt to retool its plants to stay competitive.
WestPoint struck the agreement in principal with a group of three investors holding a majority of the company's roughly $1 billion of bonds, people familiar with the matter say. It has yet to reach agreement on the restructuring with holders of about $770 million of bank debt. Under the agreement, M.L. Fontenot, the company's president and chief operating officer, will take over for Mr. Green.
A spokesman for WestPoint, which has more than 15,000 employees in 32 manufacturing facilities and 17 distribution centers, declined to comment on the filing and said Mr. Green was unavailable for comment.
As WestPoint's problems mounted during the past year, the value of its bonds plunged in secondary-market trading, and distressed-debt investors snapped up bank debt and bonds in anticipation of a restructuring that would give them equity in the company. Hedge-fund investor Edward S. Lampert of ESL Investments Inc., who recently gained a controlling interest in Kmart Corp., accumulated a large stake in the debt and was one of the parties to the agreement in principle. Through a spokesman, Mr. Lampert declined to comment. WestPoint hired Rothschild Inc. to advise it on restructuring.
WestPoint's shares, which were delisted from the New York Stock Exchange in January, traded Friday afternoon for 10.6 cents each on the over-the-counter bulletin board. A year ago, it shares were trading at $5.
The bankruptcy filing represents a considerable setback for Green, who was hired to take the helm in 1992 after WestPoint emerged from its first round in bankruptcy court, and became its largest shareholder.
In 2000, Mr. Green failed to secure financing to take the company private in a management-led buyout. Later that year, WestPoint's board approved a special dividend to shareholders of $100 million, of which Mr. Green received roughly $36 million. The following year, banks seized much of his stake after the private investment partnership that held it defaulted on a loan.
