Debt overwhelms Pillowtex

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The Associated Press

DALLAS (November 8, 2000 5:13 p.m. EST http://www.nandotimes.com) - Shares of Pillowtex Corp. plunged from already low levels Wednesday after the towel and pillow maker said it is in default on $650 million in secured credit.

If it is unable to find alternative financing, Pillowtex said it may be forced to seek bankruptcy protection from creditors.

Pillowtex makes bedroom and bathroom furnishings under the Royal Velvet, Fieldcrest and Cannon brand names.

The company said its senior lenders declined to extend a waiver for meeting financial terms beyond Tuesday but won't take any action under the credit agreements.

The Dallas-based company said that until Dec. 7 lenders will give it access to more than $20 million in unused credit under a $350 million revolving credit arrangement.

On Wednesday, Pillowtex shares fell 43.7 cents, or almost 32 percent, to close at 93.8 cents on the New York Stock Exchange. In 1998, shares briefly broke above $50 before going into a steady slide.

The company said it is also in default on $15.7 million in Pillowtex and Fieldcrest Cannon Inc. industrial revenue bonds because cross-default provisions were triggered.

Last month, chairman and chief executive Charles M. Hansen Jr., a 35-year company veteran, resigned. The company is searching for a new CEO.

(Personal comment): Another domino. Thanks to Easy Al Greenspan the flood of money allowed corporations to borrow extensively and heavily. Then when the economy retracts a little bit (we're on the tip of the iceberg now), companies start dropping like flies. I'm waiting for Amazon to bite it as they are HEAVILY indebted hoping for growth to bail them out.

-- Guy Daley (guydaley@altavista.com), November 09, 2000

Answers

re: personal comment: "Another domino."

Agreed. It's not just the telecomms and dot.com startups anymore. In today's New York Times, for example, in the Business section on-line, is a set of newsbriefs about various profit/stock warnings from retailer after retailer--Ames, Federated, Kmart, the list goes on and on. Check it out. One of the stories used the expression "harsh retail environment," if I recall correctly. "Harsh." Ha! I'm afraid this is just the beginning. End-of-year-holiday retail sales are going to be awful, I am afraid, and in the aftermath the wailing and gnashing of teeth by businesses big and small will be a sight to behold.

-- Andre Weltman (aweltman@state.pa.us), November 09, 2000.