================================================================= BURLINGTON BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) November 16, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- BURLINGTON BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Any re-mailing of BURLINGTON BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO BURLINGTON BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF BURLINGTON INDUSTRIES, INC. [00002] BURLINGTON'S SEPT. 29, 2001 CONSOLIDATED BALANCE SHEET [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 PROCEEDINGS [00004] BURLINGTON INDUSTRIES CHAPTER 11 DATABASE [00005] LIST OF BURLINGTON'S 50 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION TO HONOR PREPETITION CUSTOMER OBLIGATIONS [00007] DEBTORS' MOTION TO PAY $5.85MM OF CRITICAL VENDOR CLAIMS KEY DATE CALENDAR ----------------- 11/15/01 Voluntary Petition Date 11/30/01 Deadline to provide Utilities with adequate assurance 11/30/01 Deadline for filing Schedules of Assets and Liabilities 11/30/01 Deadline for filing Statement of Financial Affairs 11/30/01 Deadline for filing Lists of Leases and Contracts 01/04/02 Deadline to make decisions about lease dispositions 02/13/02 Deadline to remove actions pursuant to F.R.B.P. 9027 03/15/02 Expiration of Debtors' Exclusive Plan Proposal Period 05/14/02 Expiration of Debtors' Exclusive Solicitation Period 11/14/03 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO BURLINGTON BANKRUPTCY NEWS ----------------------------------------------------------------- BURLINGTON BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving BURLINGTON BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990. 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Please enter my personal subscription to BURLINGTON BANKRUPTCY NEWS. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- BURLINGTON BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF BURLINGTON INDUSTRIES, INC. ----------------------------------------------------------------- BURLINGTON INDUSTRIES, INC. 3330 W. Friendly Ave. Greensboro, NC 27410-4800 Telephone (336) 379-2000 Fax (336) 332-0815 http://www.burlington-ind.com Burlington Industries, Inc. (NYSE: BUR), together with its subsidiaries and its affiliates, is one of the world's largest and most diversified manufacturers of softgoods for apparel and interior furnishings. Founded in 1923, the Burlington Companies started out with one small plant in Burlington, North Carolina, and 200 employees, weaving typical cotton fabrics for flags, curtains, dresses and diapers. Since that time, the Burlington Companies have grown into one of the world's leading manufacturers of softgoods for apparel and interior furnishings. In particular, in the United States, the Burlington Companies are: * the largest manufacturers of worsted wool and jacquard fabrics; * the second largest manufacturer of synthetic fabrics; * the third largest manufacturer of denim fabrics; * one of the top four producers of commercial carpets; * a leading manufacturer of mattress ticking and ready-made drapery; and * leading manufacturers of woven synthetic fabrics made with 100% polyester, 100% nylon, and blends of polyester or nylon with wool, rayon, lycra, polypropylene, acrylic, Tencel(R) and acetate. Headquartered in Greensboro, North Carolina, the Burlington Companies operate 16 various-purpose manufacturing plants in the United States. In addition, on an international scale, the Burlington Companies operate three textile manufacturing plants and two finished-product assembly plants in Mexico, not including the facilities in Mexico and India utilized by the joint ventures described below. The Burlington Companies also own interests in: (a) Nano-Tex, LLC, engaged in research and development of products that enhance the performance characteristics of textile products; (b) Unifi Textured Polyester, LLC, engaged in the manufacture and sale of natural textured polyester yarn; (c) Strategic Technical Alliance, LLC, engaged in development, production and sales of special-purpose synthetic fiber products; (d) Mafatlal Burlington Industries Limited, a joint venture in India between Burlington Global Denim and Mafatlal Industries Limited, with one manufacturing plant in Navsari, in the state of Gujarat; (e) BII Mexico Laundry Holding Co., a joint venture with Parkdale Mills Incorporated, which produces cotton yarns; (f) J.C. Viramontes International, Inc. d/b/a International Garment Processors, a joint venture that owns and operates a denim laundry and finishing facility in Mexico; and (g) Mitsubishi Burlington Co., Ltd., a Japanese joint venture with Mitsubishi Rayon Co. Ltd. For their fiscal year ended September 29, 2001, the Burlington Companies, on a consolidated basis, generated net sales of approximately $1.4 billion. As of September 29, 2001, the Burlington Companies, on a consolidated basis, had approximately $1.2 billion in assets and approximately $1.1 billion in liabilities. The Debtors' workforce currently consists of approximately 10,500 full-time and part-time employees in 35 domestic states, Canada, France, Germany and Mexico. The Burlington Companies focus on fashion, specialty and value- added products, including: * fabrics supplied to manufacturers of a wide variety of apparel under various brand names, such as Raeford(R) and Maxima(R); * interior furnishings, including draperies, window coverings, bedding ensembles and table linens under the Burlington House(R) and American Lifestyle(TM) brand names; and * tufted synthetic carpets for commercial use under the Lees(R) brand name. In each of these categories, the Burlington Companies are a major supplier across distribution channels, including, with respect to certain products: (a) all segments of the branded, designer and private label businesses; (b) manufacturers of end-use consumer and commercial products; (c) department, specialty and discount stores; (d) architects, designers and commercial builders; (e) mail-order catalogs; and (f) international customers, reached mainly through independent agents and distributors. Through B.I. Transportation, Inc., the Burlington Companies operate a far-reaching truck transportation system that services not only the product delivery needs of the Burlington Companies, but also the needs of independent, third-party customers of B.I. Transportation. Finally, the Burlington Companies have a number of arrangements with third parties pursuant to which the Burlington Companies license certain intellectual property -- in particular, trademarks -- for use in connection with socks, hosiery and apparel. Thus, with a wide array of facilities and resources for textiles and fiber research and development, yarn manufacturing and dyeing, fabric weaving and dyeing, carpet tufting, garment and softgoods assembly, garment finishing and laundering and truck transportation, the Debtors, through the Burlington Companies and their joint ventures, benefit from substantial vertical integration of operations; diverse product lines in apparel, carpets and interior furnishings; recognized and respected brand names; and a strong market presence. The Burlington Companies also take pride in their well-earned reputation for innovation and standing out in a crowded marketplace. In 1952, the Burlington Companies became the first textiles company to advertise on network television. One decade later, the Burlington Companies became the first textiles company to achieve $1 billion in annual sales. From their leadership in the use of rayon when that synthetic fiber still was experimental in 1925; to their significant role in satisfying the United States' military's fabrics needs during World War II, including by the development of parachutes from then-new nylon; to their current role in creating microdenier filament yarn, made from fiber that is thinner than silk, the Burlington Companies always have been a leader in the American textiles industry. The Burlington Companies conduct their business operations in four principal operating segments: (A) PerformanceWear -- The Burlington Companies manufacture and sell woven worsted fabrics, worsted blend fabrics and synthetic fabrics to apparel manufacturers. The broad range of products utilizing the Burlington Companies' fabrics from this Segment include women's wear, men's slacks, blazers and suits, high-tech activewear, uniforms and products for medical and "clean room" and static-free uses. The principal brand names in this Segment are Burlington, Raeford(R) and Maxima(R). (B) CasualWear -- The Burlington Companies are a fashion leader and innovator in cotton apparel products. The Segment serves denim jeanswear markets worldwide, focusing on value- added, trendsetting denim fabrics and garments. (C) Interior Furnishings -- Under the Burlington House(R) and American Lifestyle(TM) brand names, the Burlington Companies offer a complete line of products for home furnishings, fabrics and consumer end-use products. These products include decorative bedding ensembles, window treatments, bath accessories, upholstery, mattress fabrics and high performance fabrics for commercial uses. (D) Carpets -- the Burlington Companies produce carpets under the Lees(R) brand name -- one of the most respected carpet brand names in the United States. The Carpets Segment produces and sells a wide variety of standard and custom commercial carpet and carpet tile and is widely known for combining cutting-edge design and high performance. Lees Carpet is found in offices, airports, hospitals, schools, hotels and other commercial installations worldwide and has received numerous industry awards over the years for outstanding quality and innovation. Events Leading to the Debtors' Chapter 11 Filings John D. Englar, serving as Senior Vice President, Corporate Development and Law for Burlington Industries, Inc., explains how the Company finds itself in the halls of the Bankruptcy Court. "Despite the Burlington Companies' vertically integrated operations, diverse product lines, valuable brands, and strong market presence, the Company has faced increasing financial stress since approximately late-1998. In particular, Burlington has been adversely affected by the weakness of the domestic textile industry over the past several years, caused primarily by the flood of cheaper foreign-manufactured goods into the United States. These industry-wide problems, coupled with the financial pressure from tighter financial covenants and increased costs under the 2000 Credit Agreement and a softening U.S. economy, have substantially diminished available liquidity, adversely impacted operations and undermined the Company's ability to complete its strategic business initiatives in the short term. Import-Related Competitive Pressures Burlington complains that foreign-made fabrics, apparel and other textile products have created dramatic competition for sales in the United States. For many years, the Company has faced ever- increasing pressures from imported goods in the home and apparel textile markets. An array of highly competitive, non-domestic producers have the ability to manufacture textiles with quality and speed roughly equivalent to that of domestic producers. These foreign competitors derive their advantages from several factors, including: (a) plentiful, inexpensive labor; (b) lower non-labor operational costs; (c) subsidies or other favorable treatment from the governments in their home countries, including less burdensome regulation; and (d) low import prices resulting from depressed currencies, as with the financial crisis in Asia during the mid-to-late 1990's and the weakness of the Euro during 2000. This competition from foreign supply sources has garnered the attention of the United States' government, which has endeavored to regulate certain imports through, for example, tariffs and trade agreements. Despite these efforts, however, imported textile products continue to dominate. For example, imported apparel still represented in excess of 85% of the United States market at the end of 2000. Thus, import-related competition, coupled with global production over-capacity, has severely reduced pricing power and, as a result, has driven profit margins down in Burlington's key product areas. Credit Facility Pressures Since December 5, 2000, the 2000 Credit Agreement has subjected Burlington to tighter financial covenants, increased fees and the collateralization of substantially all of its domestic assets (other than accounts receivable and certain limited properties). Various ratios and related covenants in the 2000 Credit Agreement impose limitations on the Burlington Companies' liquidity and operational and financial flexibility. Moreover, interest expenses under the 2000 Credit Agreement and the Trade Receivables Facility were higher in 2001 than during 2000. Because of the Company's deteriorating financial performance as a result of competitive pressures, compliance with the terms of the 2000 Credit Agreement became progressively more difficult throughout 2001. General Economic and Retail Downturn In addition to foreign-based competitive pressures, many domestic department stores and retailers have experienced financial difficulties as a result of slower retail sales and other factors. This, in turn, has prompted inventory cutbacks and delays in new product roll-outs. In connection with the well- publicized economic slowdown in the United States during the past approximately 20 months, the Burlington Companies' customers, both commercial and consumer, have reduced both the frequency and volume of their purchases of the Burlington Companies' goods. During the past seven to eight months especially, the Burlington Companies have witnessed a remarkable decline in customer activity. For example, for the three months ended June 30, 2001, sales dropped in all of the Burlington Companies' Segments. Indeed, with respect to the Interior Furnishings Segment, sales dropped by as much as 19% from the same quarter in year 2000. Unfortunately, this softening trend in the retail sector and beyond has been exacerbated by the terrorist attacks on the United States on September 11, 2001, and the related, subsequent events and government warnings reported regularly throughout the country's media. Consumer and commercial confidence generally, which were questionable even before September 11, are now clearly negative. The retail channels that carry the Burlington Companies' products have become dramatically skeptical about restocking inventory absent strong evidence of renewed consumer confidence. As a result, in recent weeks, forward orders for the Burlington Companies' products reached their lowest point in recent memory. Initiatives to Counter Financial Stress For nearly three years, the Burlington Companies have undertaken specific, proactive efforts designed to counter their deteriorating financial performance and credit facility pressures. The major elements of these efforts were: (1) 1999 Restructuring Initiative. In the first quarter of 1999, the Burlington Companies implemented a comprehensive reorganization initiative primarily related to the apparel fabrics business. The major elements of the 1999 Restructuring included the: (a) consolidation of certain operations to form the PerformanceWear and CasualWear Segments, (b) elimination of certain operations from the Burlington Companies' former sports apparel segment, (c) reduction of apparel fabrics production capacity by approximately 25%, (d) reduction of overhead costs throughout the Burlington Companies, (e) elimination of seven plants through sale or shut-down and (f) termination of approximately 2,800 fill-time employees. (2) 2000 Restructuring Initiative. In the last quarter of 2000, Burlington's Board of Directors approved a plan designed to strengthen the Burlington Companies' future profitability and flexibility. The major elements of the 2000 Restructuring included: (a) closing two plants and relocating some production to other, under-utilized facilities; (b) reducing operations at certain of the PerformanceWear Segment facilities; (c) reducing the size of B.I. Transportation's trucking fleet; (d) closing one of B.I. Transportation's trucking facilities; (e) eliminating approximately 2,500 jobs in the United States and 1,000 jobs in Mexico; (f) exiting the PerformanceWear Segment's garment-making business; (g) eliminating certain unprofitable product lines; (h) selling the Carpets Segment's BH Floor Accents business and its Bacoval(R) printed mat business; and (i) devoting approximately $77.2 million in cash to net repayments of long-term and short-term debt. (3) The New Business Model. Building on the initiatives implemented through the 1999 Restructuring and the 2000 Restructuring, the Burlington Companies' management team has developed a modified business model, designed to better serve their customers' expanding needs in the global supply chain. The new business model, which is centered on elevating the Burlington Companies' ability to bring fabric innovation and distinctive products to the market, consists primarily of the following four components: (a) continuing to build the Burlington Companies' highly successful Lees(R) Carpet Segment; (b) expanding global sourcing partners and leveraging the Burlington Companies' styling and technology capabilities internationally through [non-debtor] Burlington WorldWide Limited, based in Hong Kong; (c) providing unsurpassed performance and fabric innovation through the advanced proprietary technology developed by Nano-Tex, LLC; and (d) building upon and accelerating the manufacturing improvements in the Burlington Companies' North American operations. (4) Renegotiation of 2000 Credit Agreement Covenants. Beginning in April, 2001, Burlington initiated steps to address the possibility that their deteriorating financial performance would lead to noncompliance with the covenants imposed under the 2000 Credit Agreement. Burlington undertook an extensive search for appropriate legal and financial advisors to assist the Burlington Companies with its restructuring efforts. Discussions with Chase, as Administrative Agent for the Lenders, began in mid-summer and continued diligently. Nevertheless, Burlington was not able to achieve an amendment or waiver of noncompliance with the covenants under the 2000 Credit Agreement. Consequently, Burlington became subject to even tighter covenants and ratios as of September 29, 2001. In light of the foregoing, Mr. Englar explains, to give the Company an opportunity to focus on its operations, implement the new business model and complete its prepetition restructuring efforts, Burlington's Board of Directors determined that filing for chapter 11 protection would be the best alternative to preserve values for stakeholders. ----------------------------------------------------------------- [00002] BURLINGTON'S SEPT. 29, 2001 CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------- BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES Consolidated Balance Sheets At September 29, 2001 ASSETS Current assets: Cash and cash equivalents $87,473,000 Short-term investments 13,394,000 Customer accounts receivable after deductions of $12,406,000 for doubtful accounts, discounts, returns and allowances 195,571,000 Sundry notes and accounts receivable 21,985,000 Inventories 216,968,000 Prepaid expenses 3,329,000 -------------- Total current assets 538,720,000 Fixed assets, at cost: Land and land improvements 28,116,000 Buildings 387,779,000 Machinery, fixtures and equipment 623,185,000 Less accumulated depreciation and amortization (501,902,000) -------------- Fixed assets - net 537,178,000 Other assets: Investments and receivables 48,405,000 Intangibles and deferred charges 60,692,000 -------------- Total other assets 109,097,000 -------------- $1,184,995,000 ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Long-term debt due currently $873,968,000 Accounts payable - trade 62,171,000 Sundry payables and accrued expenses 79,724,000 Income taxes payable 4,566,000 Deferred income taxes 31,819,000 -------------- Total current liabilities 1,052,248,000 Long-term liabilities 53,957,000 Deferred income taxes 53,346,000 Shareholders' equity: Common stock issued 700,000 Capital in excess of par value 885,935,000 Accumulated deficit (703,416,000) Accumulated other comprehensive income (loss) (1,860,000) Cost of common stock held in treasury (155,915,000) -------------- Total shareholders' equity 25,444,000 -------------- $1,184,995,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 PROCEEDINGS ----------------------------------------------------------------- Burlington Industries Files Voluntary Petitions for Reorganization GREENSBORO, North Carolina -- November 15, 2001 -- Burlington Industries, Inc. (NYSE: BUR) today announced its intention to accelerate its initiatives to transition and modify its business model in order to better serve its customers' expanding needs in the global supply chain. In order to implement the company's new business model, Burlington Industries and certain of its U.S. subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The emerging business model, which is centered on elevating the company's ability to bring fabric innovation and distinctive products to the market, consists of four main components: -- Continuing to build its highly successful Lees Carpets business -- Expanding global sourcing partners and leveraging its own styling and technology capabilities internationally through Burlington WorldWide Limited, a recently formed subsidiary based in Hong Kong -- Providing unsurpassed performance and fabric innovation through the advanced proprietary technology developed by Nano-Tex, LLC -- Building upon and accelerating the manufacturing improvements made in its North American operations George W. Henderson, III, Chairman and CEO, commented, "Our business model going forward adds worldwide reach to our North American capability to provide products, services and global solutions to our customers. The ability to enhance products with the advanced technology of Nano-Tex and extend our reach beyond our borders through Burlington WorldWide Limited increases the value of our product development and technology capabilities while providing us access to broader, more comprehensive product lines. Our Lees Carpets business continues to serve the market with innovative flooring solutions and industry firsts. We are creating a more flexible and responsive company capable of meeting the diversified and ever changing needs of our customers." The voluntary petitions for reorganization were filed in the U.S. Bankruptcy Court for the district of Delaware. International operations, joint venture partnerships, Nano-Tex, LLC and Burlington WorldWide Limited were not included in the filing. Henderson continued, "This filing is necessitated by the excess level of debt in our capital structure which prevents us from making the changes we deem necessary to our future success." Burlington Industries also announced it has received a commitment for a facility of up to $190 million in debtor-in- possession (DIP) financing underwritten by J.P. Morgan Chase & Co., which, subject to court approval, will augment the company's liquidity to provide adequate funding for operations during the reorganization period. The company expects to generate positive cash flow during fiscal 2002. The company anticipates no disruption to daily operations at the company's headquarters and manufacturing plants or to the delivery of customer orders. Its main priority continues to be delivering innovative, high-quality products and services on time. "This decision was not made lightly and we believe it is in the best interest of the long-term viability of the company," said Henderson, commenting on the restructuring action. "We recognize the need for aggressive and comprehensive change in our business model and we can no longer afford the time needed to incrementally transition the company. By utilizing the Chapter 11 process, we can control and guide our reorganization activities under the protection of the court to expedite the debt and operational restructuring that we have been pursuing and at the same time ensure that our daily operations continue uninterrupted. "We currently have good liquidity. As a result of our working capital and operational improvements achieved during the year, we currently have approximately $60 million cash on hand. This cash, along with the DIP, financing, once approved, will provide the funds we need to operate during the reorganization process." Henderson continued, "Our restructuring efforts over the last 2-1/2 years have resulted in significant progress towards transitioning Burlington to better compete with and serve the needs of an emerging global environment. We made tough decisions and streamlined many of our businesses. While we have met the goals set in these plans, outside factors, including a continuing flood of low-cost and often subsidized foreign imports and a slowdown in consumer spending have hit the textile industry hard. "A key factor that led Burlington to take these steps is the U.S. Government's history of using the textile industry as a bargaining chip in international relations. The results have been devastating for the industry, leading to job losses, plant closing and liquidations. Imports have been growing rapidly for many years, but since 1999, the volume of imported apparel has grown at five times the rate of consumption, squeezing out U.S.- made products to the point that four out of five garments sold in this country today are imported. "To make matters worse, we are not competing on a level playing field. This flood of textile and apparel imports includes not only products subsidized by foreign governments, but billions of dollars of goods that are imported illegally. Our government, with the exception of support from elected officials in our region, has made no effective response to these unfair trade practices, and our industry does not have reciprocal access to the markets of the exporting countries." In a closing comment Henderson stated, "The intensity of these challenges has worsened with the recent economic decline and uncertainty, and additional slowing in retail sales since September. It has become clear that we need to accelerate our efforts to reshape the company so that we can serve our customers' needs and add value to the company long-term. We are committed to meeting the challenges of our industry head on and emerging from this process a stronger, leaner and more profitable enterprise." Burlington Industries, Inc. is one of the world's largest and most diversified manufacturers of softgoods for apparel and interior furnishings. ----------------------------------------------------------------- [00004] BURLINGTON INDUSTRIES CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor entities filing separate chapter 11 petitions: Case No. Debtor Entity -------- ------------- 01-11282 Burlington Industries, Inc. 01-11283 B.I. Transportation, Inc. 01-11284 BH/M-II Inc. 01-11285 BI Properties Inc. 01-11286 BI Properties I Inc. 01-11287 BII Mexico Holdings I, Inc. 01-11288 BII Mexico Holdings II, Inc. 01-11289 BII Mexico Laundry Holding Co. 01-11290 BII Mexico Yarns Holding Co. 01-11291 Burlington Apparel Services Company 01-11292 Burlington Fabrics, Inc. 01-11293 Burlington Fabritex USA, Inc. 01-11294 Burlington Industries I, LLC 01-11295 Burlington Industries II, LLC 01-11296 Burlington Industries III, LLC 01-11297 Burlington Industries IV, LLC 01-11298 Burlington Industries V, LLC 01-11299 Burlington International Services Company 01-11300 Burlington Investment Inc. 01-11301 Burlington Investment II Inc. 01-11302 Burlington Mills Corporation 01-11303 Burlington Mills, Inc. 01-11304 Burlington Worldwide, Inc. 01-11305 Burlington Worsteds Inc. 01-11306 Distributex, Inc. Petition Date: November 15, 2001 U.S. Bankruptcy Court: United States Bankruptcy Court District of Delaware 824 Market Street, Fifth Floor Wilmington, Delaware 19801 Telephone (302) 252-2900 Bankruptcy Judge: The Honorable Peter J. Walsh Debtors' Lead Counsel: David G. Heiman, Esq. Richard M. Cieri, Esq. Carl E. Black, Esq. JONES, DAY, REAVIS & POGUE North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Telephone (216) 586-3939 Fax: (216) 579-0212 and Brett J. Berlin, Esq. JONES, DAY, REAVIS & POGUE 3500 SunTrust Plaza 303 Peachtree Street, N.E. Atlanta, Georgia 30308 Telephone (404) 521-3939 Fax (404) 581-8330 and Michelle Morgan Harner, Esq. JONES, DAY, REAVIS & POGUE 77 West Wacker, Suite 3500 Chicago, Illinois 60601 Telephone (312) 782-3939 Fax (312) 782-8585 Debtors' Local Counsel: Daniel J. DeFranceschi, Esq. Paul N. Heath, Esq. RICHARDS, LAYTON & FINGER, P.A. One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Telephone (302) 658-6541 Fax (302) 651-7701 U.S. Trustee: United States Trustee for Region III 844 King Street, Suite 2313 Lockbox 35 Wilmington, Delaware 19801-3519 Telephone (302) 573-6491 Fax (302) 573-6497 ----------------------------------------------------------------- [00005] LIST OF BURLINGTON'S 50 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ The Bank of New York Unsecured Claims $150,000,000 As Indenture Trustee for the 7.25% Notes Due 2005 Attn: Ming Shiang Vice President 5 Penn Plaza, 13th Floor New York, NY 10001-1810 Tel: 212-896-7197 Fax: 212-896-7298 El DuPont NeMour Trade Debt $8,102,420 Attn: Bob Novotny Chestnut Run Plaza Bldg. 728, Room 133 Wilmington, DE 19880 Tel: 302-892-7215 Fax: 302-999-4064 Unifi Inc. Trade Debt $1,529,883 Billy Moore 7201 W. Friendly Avenue Greensboro, NC 27410 Tel: 336-316-5664 KOSA Trade Debt $1,222,550 Attn: Frank Tammel PO Box 651558 4501 Charloote Park Dr Charlotte, NC 28265-1558 Tel: 704-586-7497 Fax: 704-480-4848 CIBA Specialty Chemical Trade Debt $765,857 Attn: Jack Larkins PO Box 7247-7318 Tel: 336-377-2204 Fax: 336-801-2808 Carolina Mills, Inc. Trade Debt $693,512 Mike Groce 618 Carolina Avenue PO Box 157 Maiden, NC 28650 Tel: 800-438-4865 Fax: 828-428-2335 Staple Cotton Co-op Assoc. Trade Debt $637,816 Attn: Meredith Allen 214 W Market St. PO Box 30550 Nashville, TN 37241-0550 Tel: 662-453-6231 Fax: 662-453-5347 Carolina Power & Light Utility $632,618 Company Attn: David Phipps 420 W. Gannon Avenue Raleigh, NC 27698-0001 Tel: 919-269-4715 Drake Extrusion Trade Debt $596,276 Attn: David Turner PO Box 60209 11 Front St. Charlotte, NC 28260 Tel: 276-632-0159 x 105 Fax: 276-634-0224 Chase Bank of Texas Trade Debt $523,135 David Stanford A/C Plains Cotton Co-Op Assoc. PO Box 200071 A/C 1274760 Houston, TX 77216 Tel: 806-762-7265 Fax: 806-762-7335 Harriet & Henderson Trade Debt $491,807 Walt Brown PO Box 65652 Charlotte, NC 28265-0652 Tel: 336-228-7897 Fax: 252-438-3937 Ronile Inc. Trade Debt $490,290 Attn: Eddie Prillaman Dept. 79227 701 Orchard Ave. Rocky Mount, VA 24151 Tel: 540-484-4678 Fax: 540-483-4675 Synthetic Industries Trade Debt $437,043 PO Box 414372 Tel: 706-271-5623 Fax: 706-625-0769 HSBC Business Credit Trade Debt $402,807 7201 W. Friendly Avenue Greensboro, NC 27410 Tel: 336-316-5664 Fax: 336-294-4751 Colbond, Inc. Trade Debt $361,899 Chuck Wagner Nonwovens, Inc. Dept. 19996 100 Abutment Rd. Dalton, GA 30721 Tel: 828-665-5072 Fax: 858-665-5005 ABCO Industries Trade Debt $310,173 Attn: Al Bell PO Box 75447 Charlotte, NC 28275-0447 Tel: 864-253-8400 Fax: 864-576-9378 Conso Products Trade Debt $282,196 Bob Stiso PO Box 116210 Atlanta, GA 30368-6210 Tel: 212-686-7676 Fax: 212-686-9890 Colonial Printing Co. Trade Debt $277,454 75 Greeson Bend Rd. Chatsworth, GA 30705 Tel: 706-695-7431 Fax: 706-695-1081 Texturing Services, Inc. Trade Debt $272,554 Attn: Douglas Stanley PO Box 14862 Greensboro, NC 27415 Tel: 336-342-9085 Fax: 336-342-9745 HSBC Business Credit Trade Debt $269,605 Attn: John Garris 1823 Boone Rail Road Sanford, NC 27330 Tel: 919-770-6383 Fax: 919-718-5495 Exxon Chemicals America Trade Debt $265,432 George McGlamery Dept AT40161 400 Interstate Pkwy SE Atlanta, GA 31192 Tel: 770-956-2727 Fax: 770-956-2735 Yorkshire Americas Inc. Trade Debt $261,784 Attn: Louis Lopez 3001 N. Graham St. Charlotte, NC 28206 Tel: 704-372-5890 Fax: 704-376-3091 Frontier Spinning Mills Trade Debt $260,371 Attn: John Garris 1823 Boone Trail Road Sanford, NC 27330 Tel: 919-770-6383 Fax: 919-718-5495 WWD Partners LLC Trade Debt $250,528 110 West 40th Street Suite 604 New York, NY 10018 Tel: 336-292-3177 Fax: 336-852-6640 M.S. Carriers Trade Debt $249,244 Universal Textile Trade Debt $240,659 Technologies Printer Space Print Trade Debt $214,395 Exxon Chemical America Trade Debt $203,482 Buffalo Color Corporation Trade Debt $192,333 Connecticut General Life Insurance $183,257 Insurance Co Caraustar Trade Debt $172,803 Capital Factors Trade Debt $170,576 Formosa Plastics Trade Debt $160,650 Textile Rubber & Trade Debt $159,632 Chemical Co. Dominion Virginia Power Trade Debt $158,527 Galey & Lord Trade Debt $149,957 Wellman, Inc. Trade Debt $141,565 Sulzer Textile, Inc. Trade Debt $136,824 Mount Vernon Mills I Trade Debt $135,336 CSI/Crown Inc. Trade Debt $129,648 Parkdale Mills, Inc. Trade Debt $129,142 DFS Acceptance Trade Debt $128,209 Seydel Wooley & Co. Trade Debt $123,505 Southeastern Freight Trade Debt $120,076 Pevler Coal Sales Co. Trade Debt $119,699 Amoco Fabrics & Fibers Trade Debt $116,906 Colorite Polymers Trade Debt $116,875 Wayn-Tex, Inc. Trade Debt $107,831 Rosenthal & Rosenthal Trade Debt $106,562 ----------------------------------------------------------------- [00006] DEBTORS' MOTION TO HONOR PREPETITION CUSTOMER OBLIGATIONS ----------------------------------------------------------------- In the ordinary course of their businesses, Burlington engages in marketing, sales and promotional practices that are targeted to develop and sustain positive reputations for their products in the marketplace. These customer-targeted practices and promotional efforts include: (a) Credits. The Debtors utilize various practices and procedures that are designed to attract new customers for the Debtors' products and to enhance product loyalty among the Debtors' existing customer base, including rebates, discounts, contras, refunds, adjustments (including adjustments to billing) and other credits relating to sales. As of the Petition Date, the Debtors owed Credits to various customers on account of goods or services delivered or provided to customers prepetition. (b) Deposits. The Debtors typically receive deposits or prepayments from certain customers for goods and services not yet delivered or provided to such customers in full or in part. The Debtors generally apply the Deposits towards the customer's account and then subsequently deliver or provide the goods or services in accordance with the terns of the parties' agreement. As of the Petition Date, the Debtors held numerous Deposits for goods or services not yet delivered or provided to customers. (c) Warranty Claims. In addition, the Debtors offer and extend certain warranties to cover products sold to their customers. Although these warranties may vary based on the product or the particular customer, they generally impose an obligation on the Debtors to replace products that are defective, nonconforming or otherwise unacceptable to the Debtors' customers. As of the Petition Date, the Debtors had outstanding obligations on account of Warranty Claims. (d) Promotional Claims. Finally, the Debtors enter into arrangements with certain customers under which the customer promotes and advertises (including cooperative advertising and advertising placement in local newspapers or trade publications) the Debtors' products. The Debtors, in turn, have certain monetary or performance obligations to their customers under these arrangements, some of which were outstanding as of the Petition Date. John D. Englar, Burlington's Senior Vice President, Corporate Development and Law, tells Judge Walsh that the Company estimates, as of the Petition Date, that the aggregate sum of these Customer Obligations approximates $7,000,000. The success and viability of the Debtors' businesses, Mr. Englar says, are dependent upon the loyalty and confidence of their customers. The continued support of this constituency is absolutely essential to the survival of the Debtors' businesses and the Debtors' ability to reorganize. Any delay in honoring or paying various Customer Obligations will severely and irreparably impair the Debtors' customer relations at a time when the loyalty and support of those customers are extremely critical. By contrast, honoring these prepetition obligations will require minimal expenditure of estate funds and will assist the Debtors in preserving key customer relationships to the benefit of all stakeholders. Accordingly, to preserve the value of their estates, the Debtors must be permitted, in the Debtors' sole discretion, to continue honoring or paying all Customer Obligations without interruption or modification. In addition, to provide necessary assurances to the Debtors' customers on a going-forward basis, the Debtors request authority to continue honoring or paying all obligations to customers that arise from and after the Petition Date in the ordinary course of the Debtors' businesses. Mr. Englar notes that the Debtors anticipate their Prepetition Customer Obligations will be satisfied primarily (if not exclusively) by providing on-going goods to customers in the ordinary course of the Debtors' businesses. The Debtors won't be writing checks totaling $7,000,000. Certain Customer Obligations, of course, may be satisfied by providing refunds or similar direct payments to customers. David G. Heiman, Esq., tells Judge Walsh that this request is substantially similar to requests made in other chapter 11 mega- cases, including In re USG Corp., No. 01-2094 (RJN) (D. Del. June 27, 2001) (Judge Farnan); In re Pillowtex, Inc., No. 00-4221 (SLR) (D. Del. Nov. 14, 2000); In re Purina Mills, Inc., No. 99- 3938 (SLR) (D. Del. Oct. 29, 1999); In re Loewen Group Int'1, Inc., No. 99-1244 (PJW) (D. Del. June 1, 1999) (Judge Farnan); In re Borden Chemicals & Plastics, No. 01?1268 (RRM) (Bankr. D. Del. Apr. 5, 2001) (Judge Newsome); In re The Imperial Home Decor Group Inc., No. 00-19 (MFW) (Bankr. D. Del. Jan. 5, 2000); In re Montgomery Ward Holding Corp., No. 97-1409 (PJW) (Bankr. D. Del. July 8, 1997); In re Silas Creek Retail, Inc., No. 97-1239 (HSB) (Bankr. D. Del. June 13, 1997); In re Fruehauf Trailer Corp., No. 96?1563 (PJW) (Bankr. D. Del. Oct. 8, 1996); In re Trans World Airlines. Inc., No. 92-115 (HSB) (Bankr. D. Del. Jan. 31, 1992); accord In re LTV Steel Co., Inc., No. 00-43866 (Bankr. N.D. Ohio Dec. 29, 2000); In re The Elder-Beerman Stores Corn., No. 95- 33643 (Bankr. S.D. Ohio Oct. 17, 1995); In re Federated Dept. Stores, Inc., Nos. 1-90-00130 through 1-90-00196 (Bankr. S.D. Ohio Jan. 15, 1990). The Debtors make it clear that nothing contained in their request is intended or should be construed as: (a) an admission as to the validity of any claim against the Debtors; (b) a waiver of the Debtors' rights to dispute any claim; or (c) an approval or assumption of any agreement, contract or lease, pursuant to section 365 of the Bankruptcy Code. ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO PAY $5.85MM OF CRITICAL VENDOR CLAIMS ----------------------------------------------------------------- By this Motion, the Debtors seek authority from Judge Walsh to pay -- in their sole discretion and subject to conditions they may deem appropriate -- prepetition claims of certain critical vendors and service providers. In the ordinary course of the Debtors' businesses and their manufacturing processes, John D. Englar, Burlington's Senior Vice President, Corporate Development and Law, explains the Debtors regularly obtain goods and services from three types of Critical Vendors: (1) Processor Claims -- In the day-to-day operation of their businesses, the Debtors rely on certain outside processors that: (a) receive work in process from the Debtors; (b) perform processing necessary to finish the Debtors' products to the Debtors' specifications; and (c) in some cases, ship the processed materials or finished products to the Debtors or their customers. As a result, the Processors have possession of the Debtors' materials or products in the ordinary course of their businesses. As of the Petition Date, many of the Processors had claims for goods and services previously provided to the Debtors It is essential for the Debtors' continuing business viability and the success of their reorganization efforts that they maintain the reliable and efficient flow of goods through their manufacturing and distribution systems. In most cases, goods are moved through these integrated systems on a "just in time" basis -- i.e., the Debtors' manufacturing facilities or customers receive goods only as and when needed. Unless the Debtors continue to receive and deliver work in process, supplies and finished products on a timely basis and without interruption, certain of their manufacturing operations (or their customers' operations) may be forced to shut down in the immediate postpetition period, thereby causing potentially irreparable damage to the Debtors' businesses and their reorganization efforts. If the Debtors fail to pay the Processor Claims, the Debtors believe that many Processors may stop providing their essential goods and services to the Debtors. Given the importance of moving goods quickly through the Debtors' manufacturing and distribution systems, even the slightest delay in receiving goods and services from Processors could cause a substantial disruption to the Debtors' operations, potentially delaying shipments to customers, damaging the Debtors' business reputation and undermining the Debtors' ability to generate ongoing operating revenue. Even if suitable alternative processors were available, the time necessary to identify these replacement providers and integrate them into the Debtors' operations likely would cause a significant disruption to the Debtors' manufacturing and distribution systems in the short term and potentially would require the idling of certain facilities for a period of time. Accordingly, it is imperative that the Debtors be authorized to pay the Processor Claims to (a) ensure that the essential goods and services provided by the Processors are available to the Debtors without interruption and (b) preserve to the fullest extent possible the value of the Debtors' businesses for the benefit of all stakeholders. Moreover, the Debtors' failure to pay the Processor Claims may result in the assertion of materialman's or similar liens by many of the Processors against the Debtors' raw materials, work in process, supplies and finished products in the Processors' possession as of the Petition Date. Pursuant to section 362(b)(3) of the Bankruptcy Code, the act of perfecting such Liens, to the extent consistent with section 546(b) of the Bankruptcy Code,' is expressly excluded from the automatic stay otherwise imposed by section 362(a) of the Bankruptcy Code. Moreover, to protect their asserted lien rights, the Processors may refuse to release goods in their possession unless and until their prepetition claims for processing have been satisfied. Therefore, notwithstanding the automatic stay imposed by section 362 of the Bankruptcy Code, many of the Processors (a) may be entitled to assert and perfect Liens against the Debtors' property, which would entitle them to payment ahead of other general unsecured creditors in any event; and (b) may hold the property subject to the asserted Liens pending payment of their prepetition claims, to the direct detriment of the Debtors and their respective estates. The Debtors estimate that, as of the Petition Date, the aggregate amount of Processor Claims was approximately $350,000.00. (2) Single Source Vendor Claims Certain essential raw materials, supplies and other goods and services required to manufacture the Debtors' products are available only from a single supplier. Because the Debtors do not have any viable alternatives to obtain substitute goods or services from other suppliers, the Debtors have determined that they must be able to satisfy the prepetition claims of the Single Source Vendors to ensure that these essential Single Source Goods will continue to be available to them without interruption. In many cases, no other manufacturer or supplier can supply the required Single Source Goods in any form. For example, certain types of dye that are essential to the Debtors' manufacturing process cannot be obtained elsewhere. Similarly, other Single Source Vendors supply the Debtors with unique or specially-processed products or services -- including specially dyed fibers and fabrics -- that are made or provided to the Debtors' exact specifications. Certain of the Single Source Vendors sell the Single Source Goods to factors who, in turn, sell the Single Source Goods directly to the Debtors. Because the Debtors can obtain these Single Source Goods only through the Factors, certain of the Single Source Vendor Claims that the Debtors seek authority to pay actually will be claims by Factors on account of their prepetition provision of Single Source Goods and will be satisfied by payments to the applicable Factor, rather than directly to the applicable Single Source Vendor. In other cases, substitute goods from other potential suppliers technically are available, but these alternate suppliers cannot provide Single Source Goods that meet the Debtors' requirements for quality, quantity or reliability, or cannot ensure availability on a cost-efficient and timely basis in the appropriate geographic areas, particularly where such goods must be provided without delay to meet "just in time" schedules. As a result, the Debtors cannot rely on these alternate sources to supply Single Source Goods. For example, the use of raw materials of inferior or inconsistent quality would undermine the Debtors' ability to maintain the high quality standards of their products that are necessary to (a) meet their customers' longstanding expectations and (b) preserve the value of the Debtors' estates. Likewise, the Debtors cannot rely on alternate suppliers of high quality goods if these suppliers lack the capability to produce the necessary products in sufficient quantities -- and to distribute those products to the Debtors' various facilities in a timely fashion -- to permit the Debtors to maintain their manufacturing operations without interruption. For these reasons, the Debtors believe that any interruption in the supply of Single Source Goods would immediately jeopardize their ability to maintain their manufacturing operations and, in turn, generate revenues. Moreover, even a temporary disruption in the Debtors' manufacturing operations would result in the Debtors' failure to meet their supply commitments to customers and thus may irreparably damage the Debtors' critical customer relationships. Under these circumstances, the Debtors believe that it is essential to pay the Single Source Vendor Claims to ensure that the Single Source Goods continue to be supplied without interruption on a postpetition basis. Moreover, a significant portion of the Single Source Vendor Claims relates to purchases of goods on credit in the days immediately preceding the Petition Date. As such, the Debtors believe that certain of these claims may be subject to treatment and payment as reclamation claims, pursuant to section 2-702 of the Uniform Commercial Code and section 546(c) of the Bankruptcy Code. Because such reclamation claims ultimately may be paid or otherwise satisfied from assets of the Debtors' estates, the payment of such claims pursuant to this Motion would not deplete the Debtors' assets generally available to other creditors. Further, by paying the Single Source Vendor Claims pursuant to this Motion, the Debtors can avoid the administrative costs typically associated with reconciling and, if necessary, litigating reclamation claims. The Debtors estimate that, as of the Petition Date, the aggregate amount of Single Source Vendor Claims was approximately $3,700,000.00. (3) International Vendors In the ordinary course of their businesses, the Debtors purchase a variety of critical goods and services from international vendors. For example, in connection with their operations in Mexico, the Debtors rely on a variety of local vendors and service providers to provide goods and services relating to the production and finishing of certain of the Debtors' products. On the Petition Date, certain of the International Vendors had outstanding claims for goods and services previously provided to the Debtors. If these International Vendor Claims are not paid, there is a significant risk that certain of the International Vendors will refuse to honor existing contracts and pending orders and, thereby (a) disrupt the Debtors' businesses and (b) damage the Debtors' relationships with customers whose orders go unfilled. Under these circumstances, the Debtors would experience a disruption of their businesses, to the direct detriment of their reorganization efforts. Accordingly, the Debtors believe that it is critical to pay the International Vendor Claims to avoid any disruption to their businesses and customer relationships arising from the failure of the International Vendors to provide previously ordered goods and services. The Debtors estimate that, as of the Petition Date, the aggregate amount of the International Vendor Claims was approximately $1,800,000.00. To maximize the benefits to the Debtors' estates, the Debtors propose to condition the payment of each Critical Vendor Claim on such terms, if any, as the Debtors deem necessary, in the Debtors' sole discretion, to ensure that the holder of such claim will continue to supply goods or services to the Debtors after the Petition Date on the terms and in the manner that such goods or services were provided prior to the Petition Date (or such other terns as the Debtors determine to be necessary). *** End of Issue No. 1 ***