================================================================= WESTPOINT BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2003 (ISSN XXXX-XXXX) June 3, 2003 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- WESTPOINT 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. New issues are prepared by Danilo R. Munoz, Jr., Frauline Sinson-Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of WESTPOINT BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO WESTPOINT BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF WESTPOINT STEVENS [00002] WESTPOINT'S CONSOLIDATED BALANCE SHEET AT SEPT. 30, 2002 [00003] COMPANY'S PRESS RELEASE CONCERNING THE CHAPTER 11 FILING [00004] WESTPOINT STEVENS CHAPTER 11 DATABASE [00005] LIST THE DEBTOR'S 20-LARGEST UNSECURED CREDITORS [00006] LIST THE DEBTOR'S 5-LARGEST SECURED CREDITORS [00007] DEBTOR'S EMERGENCY MOTION TO USE LENDERS' CASH COLLATERAL [00008] DEBTOR'S MOTION TO OBTAIN $300 MILLION OF DIP FINANCING [00009] S&P CUTS WESTPOINT STEVENS RATINGS TO 'D' & ENDS WATCH [00010] FITCH DOWNGRADES WESTPOINT STEVENS' SENIOR NOTES TO 'D' [00011] MOODY'S WITHDRAWS THE RATINGS OF WESTPOINT STEVENS, INC. KEY DATE CALENDAR ----------------- 06/01/03 Voluntary Petition Date 06/16/03 Deadline for filing Schedules of Assets and Liabilities 06/16/03 Deadline for filing Statement of Financial Affairs 06/16/03 Deadline for filing Lists of Leases and Contracts 06/21/03 Deadline to provide Utilities with adequate assurance 07/31/03 Deadline to make decisions about lease dispositions 08/30/03 Deadline to remove actions pursuant to F.R.B.P. 9027 09/29/03 Expiration of Debtor's Exclusive Plan Proposal Period 11/28/03 Expiration of Debtor's Exclusive Solicitation Period 06/01/03 Deadline for Debtor's 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 WESTPOINT BANKRUPTCY NEWS ----------------------------------------------------------------- WESTPOINT BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) WESTPOINT 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' case. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of WESTPOINT BANKRUPTCY NEWS is prohibited. 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 WESTPOINT STEVENS ----------------------------------------------------------------- WestPoint Stevens Inc. 507 W. 10th St. West Point, GA 31833 Telephone (706) 645-4000 Fax (706) 645-4121 http://www.westpointstevens.com WestPoint Stevens manufactures, markets and distributes an extensive range of bed and bath products, incluiding: * bath rugs * bath towels * bedspreads * comforters * duvet covers * sheets * decorative pillows * pillowcases * blankets For almost 200 years, the Company has brought quality, comfort and style to American homes. The Company's family tree includes three of the most famous textile makers of the past: * J.P. Stevens and Co. Inc., * Pepperell Manufacturing Company and * West Point Manufacturing Company. WestPoint markets its products under well-known and firmly established registered trademark brand names and private labels, including: * ATELIER MARTEX(R) * CHATHAM(R) * MARTEX(R), * GRAND PATRICIAN(R) * PATRICIAN(R) * UTICA(R), * LADY PEPPERELL(R) * STEVENS(R) * LUXOR(R) * VELLUX(R) The Company also manufactures and sells Home Fashions with designer names under licensing agreements with: * Ralph Lauren Home, * Sanderson, * Glynda Turley, * Simmons Beautyrest and * Disney Home, and is the manufacturer of the Martha Stewart and Joe Boxer bed and bath lines. The Company has one of the largest market shares in both the domestic sheet and pillowcase market and the domestic bath market. As a result of the acquisition of the Chatham Consumer Products Division of CM Industries in January 2001, the Company now has the largest market share in domestic blankets. The Company's products are marketed worldwide through leading department stores, mass merchants, and specialty stores, including: * Federated Department Stores, Inc. * Kmart Corporation * J.C. Penney Company, Inc. * Target Corporation * Sears Roebuck & Co., Inc. * Wal-Mart Stores, Inc. and through institutional channels located throughout the United States and in Australia, Canada, Mexico, the United Kingdom, Continental Europe, the Middle East and the Far East. The Company owns or leases 54 of its own stores from which it sells its products directly to the consumer. The Company employs 14,600 workers. WestPoint Stevens uses its New York office as the principal showroom for its extensive line of Home Fashions and operates an extensive network of manufacturing and distribution facilities located in: Alabama ------- Greenville Pillow Plant, Warehouse, Outlet Store, & Blanket Plant Fairview Complex (Office Building, Cotton Warehouse, Finishing Plant, Distribution Center, and Fabrication Plant) Fairfax Mill Lanier-Carter Mills Lanett Mill Riverdale Mill Transportation Center Lakeview Camp Fairview Camp Valley Outlet Store Abbeville Plant & Outlet Store Opelika Mill, Water Filter Plant, Finishing Plant, and Grifftex Chemical Plant Athens Outlet Store Birmingham Outlet Store Boaz Outlet Store Foley Outlet Store Arizona ------- Casa Grande Outlet Store Arkansas -------- Bentonville Sales Office California ---------- Walnut Creek Sales Office Santa Fe Sales Office Cabazon Outlet Store Camarillo Outlet Store Carlsbad Outlet Store Monterey Outlet Store Connecticut ----------- Clinton Outlet Store Delaware -------- Wilmington Outlet Store Florida ------- Chipley Plant, Warehouse, Outlet Store Destin Outlet Store Ellenton Outlet Store Naples Outlet Store Sarasota Outlet Store St. Augustine Outlet Store Georgia ------- West Point Corporate Office, Data Processing, Graphics Building, and Myhand Building, HTG Offices (a portion of the space is subleased to Jefferson Pilot Financial) Dixie Mill, Lagrange Roswell Sales Office Dalton Pillow plant (to be closed June 2003) Dunson Mill, Lagrange Columbus Outlet Store Commerce Outlet Store Dalton Outlet Store Dawsonville Outlet store Fairburn Outlet Store Lawrenceville Outlet Store Valdosta Outlet Store Indiana ------- Daleville Office Middletown Plant Kansas ------ Newton Outlet Store Louisiana --------- Coushatta Pillow Plant Maine ----- Biddeford Plant, Guest House Massachusetts ------------- Wrentham Outlet Store Michigan -------- Birch Run Outlet Store Howell Outlet Store Minnesota --------- Minneapolis Sales Office Albertville Outlet Store Woodbury Outlet Store Missouri -------- Branson Outlet Store Nevada ------ Sparks Plant & Warehouse New Jersey ---------- Jackson Outlet Store New York -------- New York City Sales Office and Showroom Central Valley Outlet Store Latham Outlet Store Riverhead Outlet Store North Carolina -------------- Alamance Plant Elkin Fiberwoven Blanket Plant, Office, and Warehouse Longview Plant Rosemary Complex (to be closed June 2003) Lumberton Outlet Store Wagram Complex Burlington Outlet Store Ohio ---- Aurora Outlet Store Oregon ------ Woodburn Outlet Store Pennsylvania ------------ Lancaster Outlet Store South Carolina -------------- Calhoun Falls Plant Greenville Store Clemson Complex Greenville Outlet Store Myrtle Beach Outlet Store Tennessee --------- Lebanon Outlet Store Pigeon Forge Outlet Store Texas ----- Plano Sales Office Allen Outlet Store Denton Outlet Store New Braunfels Outlet Store San Marcos Outlet Store Utah ---- Park City Outlet Store Virginia -------- Drakes Branch Plant Leesburg Outlet Store Williamsburg Outlet Store Washington ---------- Bellevue Sales Office Wisconsin --------- Johnson Creek Outlet Store Lester D. Sears, Senior Vice President and Chief Financial Officer of WestPoint Stevens Inc., explains the road the Company took into the bankruptcy court and how the company plans to exit. Mr. Sears has served as WestPoint's CFO since April 17, 2001. Prior to joining WestPoint, he served as Executive Vice President and CFO of Glenoit Corporation, Vice President and CFO of Perfect Fit Industries, Inc., Controller of Springs Industries, Inc.'s Consumer Products Division, Vice President, Controller, and Equity Partner of Mill Fabrics, Inc., Small Business Consultant at Deloitte Haskins and Sells, and Merchandise Manager at Sears Roebuck and Co. Mr. Sears has over fourteen years of experience in the textile manufacturing industry, and almost thirty years of experience in finance. Beginning in 2000, Mr. Sears relates, the Company undertook a strategic review of its businesses, manufacturing, other facilities, and products and implemented an Eight Point Restructuring Plan designed to streamline operations and improve profitability by implementing these business strategies: (1) expansion of brands; (2) exploration of new licensing opportunities; (3) rationalization of manufacturing operations; (4) reduction in overhead expense; (5) increase in global sourcing; (6) improvement in inventory utilization; (7) enhancement of supply chain and logistics functions; and (8) improvement in capital structure. In connection with the Eight Point Plan, the Company has already closed four plants and terminated over 1,700 employees. On September 20, 2002, the Company's board of directors approved additional restructuring initiatives in an effort to increase asset utilization, lower manufacturing costs and increase cash flow and profitability through reallocation of production assets from bath products to basic bedding products and through rationalization of West Point Stevens Stores Inc. The Company closed its Rosemary, North Carolina, towel finishing facility and 3 retail stores. Despite these initiatives, the Company continued to experience financial difficulty related primarily to restrictive covenants under its Senior Credit Facility and its existing overleveraged debt structure. The Company therefore entered into negotiations with its Senior Lenders to amend the Senior Credit Facility to permit certain restructuring, impairment and other charges and to revise certain financial ratios and minimum EBITDA covenants in its Senior Credit Facility. Despite the amendments to its Senior Credit Facility, the Company continued to experience financial difficulties which led to a default under its Senior Credit Facility and Second Lien Facility. Effective March 31, 2003, the Senior Lenders agreed to amend the Senior Credit Agreement and the Second Lien Facility and refrain from exercising any rights or remedies in respect of the Company's failure to comply with financial covenants until June 10, 2003. In order to be able to operate successfully in today's market environment and compete with increasing foreign competition, the Company's board of directors has determined it is necessary to reduce the Company's debt burden and de-lever its balance sheet. On May 16, 2003, the board of directors approved the retention of Rothschild Inc., an independent financial advisor to evaluate alternatives aimed at reducing the existing debt structure and strengthening the balance sheet. After negotiations with its Senior Lenders regarding various alternatives, the Company concluded it would be in the best interests of its creditors and shareholders to effect a consensual restructuring under chapter 11 of the Bankruptcy Code. Mr. Sears says that the Company's had extensive discussions with each of their major constituents concerning their restructuring, including the lenders under the Second-Lien Facility and their bondholders, and "anticipate at this time an expeditious and consensual restructuring under chapter 11 of the Bankruptcy Code." ----------------------------------------------------------------- [00002] WESTPOINT'S CONSOLIDATED BALANCE SHEET AT SEPT. 30, 2002 ----------------------------------------------------------------- WESTPOINT STEVENS INC. Condensed Consolidated Balance Sheets (Unaudited) At September 30, 2002 Assets Current Assets Cash and cash equivalents $3,642,000 Accounts receivable 116,389,000 Inventories 432,584,000 Prepaid expenses and other current assets 34,447,000 -------------- Total current assets 587,062,000 Property, Plant and Equipment, net 714,926,000 Other Assets Deferred financing fees 27,717,000 Other assets 4,007,000 Goodwill 46,298,000 -------------- $1,380,010,000 ============== Liabilities and Stockholders' Deficit Current Liabilities Senior Credit Facility $84,895,000 Accrued interest payable 31,540,000 Accounts payable 67,511,000 Other accrued liabilities 139,323,000 -------------- Total current liabilities 323,269,000 Long-Term Debt 1,565,000,000 Noncurrent Liabilities Deferred income taxes 170,749,000 Pension and other liabilities 97,919,000 -------------- Total noncurrent liabilities 268,668,000 Stockholders' Equity Deficit (776,927,000) -------------- $1,380,010,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING THE CHAPTER 11 FILING ----------------------------------------------------------------- WESTPOINT STEVENS REACHES AGREEMENT IN PRINCIPLE WITH NOTEHOLDERS ON FINANCIAL RESTRUCTURING -- Company Files to Implement Restructuring through Chapter 11 -- Normal Business Operations Continue -- Receives Commitment for up to $300 million in DIP Financing from Group Led by Bank of America and Wachovia WEST POINT, Georgia -- June 2, 2003 -- WestPoint Stevens Inc. (OTCBB: WSPT) -- http://www.westpointstevens.com -- today announced that it has reached an agreement in principle with the holders of a majority of its unsecured debt on the terms of a financial restructuring that will be implemented through a filing under Chapter 11 of the U.S. Bankruptcy Code. The Company said that the Chapter 11 process will help it to significantly reduce debt, return the Company to profitability and enable it to compete more effectively for the long term. The Company filed its petition with the U.S. Bankruptcy Court for the Southern District of New York. The filing entities are: WestPoint Stevens Inc., WestPoint Stevens Inc. I, WestPoint Stevens Stores Inc., J.P. Stevens & Co. and J.P. Stevens Enterprises. The Company's Canadian and European subsidiaries did not file for reorganization and normal operations continue. While the agreement in principle is subject to certain conditions, including reaching an agreement with the Company's bank lenders and submission of a Chapter 11 plan and disclosure statement, the Company expects the agreement in principle to result in an expedited reorganization process. As part of the agreement, the Company's current chief executive, Holcombe T. Green, Jr., has agreed to resign and additional independent members will be added to the Company's board of directors. The Company's board of directors has selected M.L. (Chip) Fontenot, the Company's current President and Chief Operating Officer, to take on the additional role of interim Chief Executive Officer once the bankruptcy court approves Mr. Green's severance arrangements. "The filing does not change our top priority which is to continue to supply our customers with innovative home fashions products," said Mr. Fontenot. "Ultimately, the restructuring of our balance sheet will enable us to serve our customers more effectively and better leverage our well known brands and licenses and leading distribution capabilities." In conjunction with its filing, the Company has arranged commitments for up to $300 million in debtor-in-possession ("DIP") financing from a group of banks led by Bank of America and Wachovia. Combined with normal cash flow, the DIP financing provides liquidity to continue normal operations. WestPoint Stevens will pay post-petition vendors in the normal course of business and has requested and expects to receive court permission to continue to pay employee salaries, wages and benefits as usual. Mr. Fontenot continued, "We are committed to complete our financial restructuring as quickly as possible to preserve and enhance value for the business and our stakeholders. While the decision to reorganize was difficult and we deeply regret any adverse impact on our stakeholders, it gives us the opportunity to address crucial financial issues while ensuring that all of our normal business operations continue." Under the terms of the agreement in principle, the Company's current common stock will be extinguished. ----------------------------------------------------------------- [00004] WESTPOINT STEVENS CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor entities filing separate chapter 11 petitions: Entity Case No. ------ -------- WestPoint Stevens Inc. 02-13532 WestPoint Stevens Inc. I 03-13533 J.P. Stevens & Co., Inc. 03-13534 J.P. Stevens Enterprises, Inc. 03-13535 WestPoint Stevens Stores Inc. 03-13536 Chapter 11 Petition Date: Sunday, June 1, 2003 at 12:25 a.m. Bankruptcy Court: United States Bankruptcy Court Southern District of New York Alexander Hamilton Custom House One Bowling Green, 5th Floor New York, New York 10004-1408 Telephone (212) 668-2870 Bankruptcy Judge: The Honorable Robert D. Drain Debtors' Counsel: John J. Rapisardi, Esq. Michael F. Walsh, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Telephone (212) 310-8000 Fax (212) 310-8007 http://www.weil.com/ Debtors' Financial Advisor: David L. Resnick Managing Director Rothschild Inc. 1251 Avenue of the Americas New York, NY 10020 Telephone (212) 403-3500 Fax (212) 403-3510 http://www.rothschild.com/ Debtors' Audit & Tax Advisors: Jeffrey L. Green Ernst & Young LLP 600 Peachtree Street, N.E., Suite 2800 Atlanta, GA 30308 Telephone (404) 874-8300 http://www.ey.com/ - and - Jonathan J. Schaum Ernst & Young LLP 935 Euclid Avenue, Suite 1300 Cleveland, OH 44115 Telephone (216) 861-5000 Debtors' Restructuring Advisors: David S. Miller Managing Director Ernst & Young Corporate Finance LLC 600 Peachtree Street, Suite 2800 Atlanta, GA 30308 Telephone (404) 817-4700 Fax (404) 817-4379 http://www.eycf.com/ Debtors' Claims Agent: Ron Jacobs President Bankruptcy Services LLC 757 Third Avenue, Third Floor New York, NY 10017 http://www.bsillc.com/ Debtors' Solicitation & Tabulation Agent: Jane Sullivan Vice President Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, NY 10022 Telephone (212) 750-5833 Fax (212) 750-5799 U.S. Trustee: Carolyn S. Schwartz United States Trustee for Region 2 33 Whitehall Street, Suite 2100 New York, NY 10004 Telephone (212) 510-0500 ----------------------------------------------------------------- [00005] LIST THE DEBTOR'S 20-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ The Bank of New York Bond $525,000,000 as Indenture Trustee 101 Barclay Street, Floor 21 New York, NY 10286 The Bank of New York Bond $475,000,000 as Indenture Trustee 101 Barclay Street, Floor 21 New York, NY 10286 Ralph Lauren Home Trade $3,025,097 Collections, Inc. ("RLHC") 103 Foulk Road, Suite 201 Wilmington, DE. 19803, Polo Ralph Lauren Corp. 650 Madison Avenue New York, NY 10022-1029 Nanya Plastics Trade $1,912,580 P.O. Box 1067 Charlotte, NC 28201 (843) 389-7800 Parkdale Mills Inc. Trade $1,086,311 P.O. Box 75077 Charlotte, NC 28201 (704) 874-5000 Wellman Inc. Trade $926,348 P.O. Box 751316 Charlotte, NC 28275 (704) 357-2040 Atlas Down Co. LLC Trade $563,247 64 Greenpoint Avenue Brooklyn, NY 11222-1504 (718) 383-0565 Kosa Arteva Specialties Trade $509,454 P.O. Box 7247-8529 Philadelphia, PA 19170-8529 (704) 586-7306 Buhler Quality Yams Corp. Trade $482,477 P.O. Box 506 Jefferson, GA 30549 (706) 367-9834 Progress Energy Carolinas Trade $457,482 Raleigh, NC 27698-001 (800) 452-2777 Dupont Textile & Interior Trade $455,693 P.O. Box 905430 Charlotte, NC 28290-5430 (800) 947-3746 CIT Group/Comm Trade $406,652 Serv/Hoffman Mills P.O. Box 1036 Charlotte, NC 28210-1036 (212) 684-3700 Johnston Industries Trade $401,333 P.O. Box 2153 Dept. #3384 Birmingham, AL 35287 Lee Tucker Unifi, Inc. Trade $366,588 P.O. Box 1036 Charlotte, NC 28201-1036 (336) 294-4410 E. I. Dupont DE Nemours Trade $361,336 P.O. Box 905552 Charlotte, NC 28290-5552 (704) 362-7400 Apex Mills Corporation Trade $350,336 Box 960670 Charlotte, NC 28201-11036 Jefferson Smurfit Trade $346,420 P.O. Box 651564 Charlotte, NC 28265-1546 Imex Vinyl Packaging Trade $343,144 5311 77 Ctr. Dr., Suite 95 Charlotte, NC 28217 (704) 527-1785 Steve Jeffery Belding Hausman Inc. Trade $341,589 P.O. Box 1036 Charlotte, NC 28201-1036 R.L. Stowe Mills Inc. Trade $321,842 P.O. Box 601596 Charlotte, NC 28260-1596 (704) 825-5314 ----------------------------------------------------------------- [00006] LIST THE DEBTOR'S 5-LARGEST SECURED CREDITORS ----------------------------------------------------------------- Secured Creditor Claim Amount ---------------- ------------ Satellite Senior Income Fund, LLC 623 Fifth Avenue, 20th Floor New York, NY 10022 $126,627,059.27 DK Acquisition Partners LP 885 Third Avenue New York, NY 10022 $69,498,291.76 Bank of America, N.A. Banc of America Strategic Solutions, Inc. 101 South Tryon Street NC1-002-31-31 Charlotte, NC 28255 $63,911,202.71 The Bank of New York 1 Wall Street, 16th Floor New York, NY 10286 $52,936,880.35 Scotiabanc Inc. One Liberty Plaza 165 Broadway, 26th Floor New York, NY 10006 $52,936,880.35 ----------------------------------------------------------------- [00007] DEBTOR'S EMERGENCY MOTION TO USE LENDERS' CASH COLLATERAL ----------------------------------------------------------------- WestPoint Stevens' mountain of debt primarily falls into four buckets: $447,795,000 owed under the Senior Credit Facility; plus $2,005,664 of accrued interest as of Dec. 31, 2002; and $34,685,275 on account of undrawn letters of credit. WestPoint Stevens, as Borrower, and WestPoint Stevens (UK) Limited and WestPoint Stevens (Europe) Limited, as Foreign Borrowers, entered into a Second Amended and Restated Credit Agreement dated as of June 9, 1998, providing Revolving Loans, the Foreign Currency Loan Subfacility, and the Letter of Credit Subfacility in the original aggregate principal amount of $800,000,000, among the several banks and other financial institutions from time to time parties thereto, Bank of America, N.A., as Issuing Lender, Swingline Lender, and Administrative Agent. $165,000,000 owed under the Second-Lien Facility plus $2,305,479 of accrued interest as of December 31, 2002. The "Second-Lien Facility" consists of a $165.0 million Second-Lien Credit Facility, dated as of June 29, 2001, among WestPoint Stevens, as Borrower, the banks and other financial institutions from time to time parties thereto, and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as Administrative Agent $525,000,000 owed to the holders of the 7-7/8 % senior unsecured notes due 2005, issued pursuant to that certain Indenture, dated as of June 9, 1998, with The Bank of New York, as Trustee. These Senior Notes are general unsecured obligations of WPSTV and rank pari passu in right of payment with all existing or future unsubordinated indebtedness of WPSTV and senior in right of payment to all subordinated indebtedness of WPSTV. $475,000,000 owed to the holders of the 7-7/8 % senior unsecured notes due 2008, issued pursuant to that certain Indenture, dated as of June 9, 1998, with The Bank of New York, as Trustee. These Senior Notes are general unsecured obligations of WPSTV and rank pari passu in right of payment with all existing or future unsubordinated indebtedness of WPSTV and senior in right of payment to all subordinated indebtedness of WPSTV. Valid, perfected and enforceable liens on substantially all of the Company's assets secure repayment of the secured debt obligations, and the Banks are oversecured, John J. Rapisardi, Esq., at Weil, Gotshal & Manges tells Judge Drain. Thos liens -- and the Banks' collateral -- includes all the Debtors' cash and cash that will be generated from the collection of receivables and sale of inventory. To maintain its business operations, the Debtors need access to that cash. Mr. Rapisardi reminds Judge Drain that, pursuant to section 363(c)(2) of the Bankruptcy Code, a debtor in possession may not use cash collateral without the consent of the secured party or court approval. Section 363(e) restricts a debtor's ability to dip into a lender's cash collateral unless the lender's liens are adequately protected. The determination of adequate protection is a fact specific inquiry to be decided on a case-by-case basis. See In re O'Connor, 808 F.2d 1393, 1396 (10th Cir. 1987); In re Martin, 761 F.2d 472 (8th Cir. 1985). The focus of the requirement is to protect a secured creditor from diminution in the value of its interest in the particular collateral during the period of use. See In re Kain, 86 B.R. 506, 513 (Bankr. W.D. Mich. 1988); Delbridge v. Production Credit Assoc. and Federal Land Bank, 104 B.R. 824 (E.D. Mich. 1989); In re Beker Indus. Corp., 58 B.R. 725, 736 (Bankr. S.D.N.Y. 1986); In re Ledgemere Land Corp., 116 B.R. 338, 343 (Bankr. D. Mass. 1990). The Debtors have negotiated with the Lenders and propose a basket of protections the Lenders agree are adequate to permit the Debtors continued post-petition to their cash collateral: Subject to final approval following appointment of a creditors' committee and their review of the arrangement, Judge Drain authorizes the Debtors to continue using the Lenders cash collateral in exchange for these protections: (a) the Lenders are granted a superpriority claim immediately junior to claims arising under the New Debtor-in-Possession financing facility and post- petition replacement liens on and security interests in substantially all of the assets of the Debtors having a priority immediately junior to the priming and other liens granted in favor of the DIP Agent and the DIP Lenders; (b) Monthly payment of current interest and letter of credit fees at the applicable non-default rates provided for under the Prepetition Credit Facilities; (c) Continuation of payment of the fees of the Prepetition Agents, including payment of the reasonable fees and disbursements of the Prepetition Agents' professionals; (d) At any time prior to either termination or indefeasible payment of all obligations arising under the DIP Facility, if the Debtors sell any of their real property, or any machinery or equipment on such property, which constitutes prepetition collateral of the First Priority Prepetition Lenders, then the net proceeds of that sale will be distributed as follows: (1) The First Priority Prepetition Lenders shall be entitled to the entirety of such net proceeds, if there is no Event of Default under the DIP Facility, and the Debtors have availability under the DIP Facility equal to or more than $75 million, until after the sooner to occur of: (x) the receipt of $25 million of aggregate net proceeds by the First Priority Prepetition Lenders or (y) the gross proceeds from the sale of Fixed Assets total $50 million in the aggregate; (2) Thereafter, the DIP Lenders will be entitled to 50% of the net proceeds and the First Priority Prepetition Lenders shall be entitled to 50% of the net proceeds, if there is no Event of Default under the DIP Facility, and the Debtors have availability under the DIP Facility equal to or more than $75 million; and (3) The DIP Lenders will be entitled to the entirety of the net proceeds if either an Event of Default has occurred and is continuing under the DIP Facility or the Debtors have availability under the DIP Facility of less than $75 million. (e) No requirement to extend or renew any of letters of credit issued under the First Priority Prepetition Facility and in the event of a draw on any such letters of credit, unless the Debtors are able to cause the beneficiary to rescind such draw, the Debtors shall reimburse the Prepetition Lenders in the amount paid with respect to such draw; (f) No assertion by the Debtors of any claim for costs or expenses of administration of the Debtors' chapter 11 cases against any of the Prepetition Lenders' collateral pursuant to Section 506(c) of the Bankruptcy Code; and (g) Receipt of all financial information provided to the DIP Lenders. ----------------------------------------------------------------- [00008] DEBTOR'S MOTION TO OBTAIN $300 MILLION OF DIP FINANCING ----------------------------------------------------------------- In the next 30-day period, WestPoint Stevens projects that cash receipts will total $99,852,000, expenses will total $180,471,000 and the Company needs immediate access to new credit to bridge that $80,619,000 gap. Section 364(c) of the Bankruptcy Code provides, among other things, that if a debtor is unable to obtain unsecured credit allowable as an administrative expense under section 503(b)(1) of the Bankruptcy Code, then the court may authorize the debtor to obtain credit or incur debt (i) with priority over any and all administrative expenses as specified in sections 503(b) or 507(b) of the Bankruptcy Code, (ii) secured by a lien on property of the estate that is not otherwise subject to a lien, or (iii) secured by a junior lien on property of the estate that is subject to a lien. Lester D. Sears, Senior Vice President and Chief Financial Officer of WestPoint Stevens Inc., says new unsecured borrowings are impossible, the Debtors need a new $300 million source of working capital financing to obtain raw materials and finished goods from suppliers, obtain necessary services such as maintenance and shipping, pay their employees, and operate their businesses in an orderly and reasonable manner to preserve and enhance the value of their assets and enterprise for the benefit of all parties in interest. John J. Rapisardi, Esq., at Weil, Gotshal & Manges says "the DIP Loan Agreement will provide the Debtors' vendors and suppliers with the necessary confidence to resume or continue ongoing credit relationships with the Debtors." Moreover, "the implementation of the DIP Loan Agreement will be viewed favorably by the Debtors' employees and customers and thereby help promote the Debtors' successful reorganization," Mr. Rapisardi adds. Mr. Sears relates that over the last several weeks, the Debtors explored alternative financing arrangements in order to either replace or supplement the Prepetition Credit Facilities. The Debtors conducted extensive negotiations with their First Priority Prepetition Lenders and bondholders, requesting that they provide financing. The Debtors also contacted other lending institutions, including Deutsche Bank and General Electric Capital Corporation, in an effort to obtain alternative financing. Those institutions couldn't provide competitive financing packages. The First Priority Prepetition Lenders offer the Debtors the best possible deal and negotiations with the Lenders culminated in a $300 million Post-Petition Credit Agreement, dated June 2, 2003 on these terms: Borrowers: WestPoint Stevens, Inc., and all of its debtor-affiliates Lenders: 50% Bank of America, N.A. 50% Wachovia Bank, National Association Administrative Agent: Bank of America, N.A. Syndication Agent: Wachovia Bank, National Association Book Manager and Sole Lead Arranger: Banc of America Securities LLC Commitment: $300,000,000 with a $75,000,000 sublimit for standby and documentary letters of credit. Availability: Availability is subject to a Borrowing Base equal to: (1) the sum of 85% of Eligible Accounts plus the lesser of: (x) $200,000,000, (y) 65% of the book value of eligible inventory (subject to a $120,000,000 cap), or (z) 85% of net orderly liquidation value of eligible inventory, (2) minus the Carve-Out and any past due license fees. Eligible Accounts are subject to the Agents' discretion and exclude all accounts receivable owed by Wal-Mart and Target to the extent those accounts exceed 35% of the Debtors' Receivables Portfolio. Maturity Date: June 2, 2004, with two extensions of six months each, if the Borrowers give 30 days prior written notice to the DIP Agent Use of Proceeds: Proceeds of the DIP Facility must be used for working capital and other general corporate purposes, and may be used to repurchase all outstanding receivables accounts previously sold by WPSTV to WPS Receivables Corporation under the WPSTV Securitization Facility. Priority: All loans will be treated as superpriority administrative expense claims in each of the Debtors' chapter 11 bankruptcy cases, pursuant to section 364(c)(1) of the Bankruptcy Code, having priority over all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code. Collateral: The DIP Agent and the DIP Lenders receive perfected first priority liens on all unencumbered assets and priming liens on all other assets of the Estates, subject only to the Carve-Out. Interest: At the Debtors' option, LIBOR plus 2.75% or Prime plus 0.625%, with 2.25% to 3.00% adjustments based on Availability. Mandatory Prepayments: Loans outstanding under the DIP Facility will be required to be repaid upon Borrowers' receipt of proceeds of Collateral and on the Maturity Date. Draws under letters of credit are repayable on the first business day following the draw. EBITDA Covenant: On a consolidated basis, the Debtors covenant that EBITDA will be no less than: Testing Period Minimum EBITDA -------------- -------------- Four Months Ending September 2003 $58,000,000 Seven Months Ending December, 2003 $97,000,000 Ten Months Ending March, 2004 $130,000,000 Four Months Ending $145,000,000 Each period of four consecutive Fiscal Quarters ending on or after the last day of the Fiscal Month of September, 2004 $155,000,000 In the event Availability under the DIP Facility falls below $75,000,000, then the Debtors promise that EBITDA will be no lower than: Testing Period Minimum EBITDA -------------- -------------- Five Months Ending October, 2003 $74,000,000 Six Months Ending November, 2003 $85,000,000 Eight Months Ending January, 2004 $109,000,000 None Months Ending February, 2004 $116,000,000 Eleven Months Ending April, 2004 $135,000,000 Each period of twelve consecutive Fiscal Months ending on the last day of the Fiscal Months of May, June, July and August, 2004 $145,000,000 Each period of twelve consecutive Fiscal Months ending on or after the last day of the Fiscal Month of September, 2004 $155,000,000 CapEx Covenant: The Debtors agree to limit their Capital Expenditures to $50,000,000 during any Fiscal Year; provided, that up to $15,000,000 may be carried from one year to the next if unused. Reclamation Claim Covenant: The DIP Facility prohibits returns totaling more than $1,000,000 to satisfy creditors' reclamation claims. Plant Shutdown Cost Covenant: The DIP Facility imposes an $8,500,000 limit on the amount of Post-Petition Plant Shutdown Costs, in cash, the Debtors may incur in connection with the closing and consolidation of certain [unidentified] facilities for (i) direct inventory write-offs and/or related increases in inventory reserves; (ii) write-offs of fixed assets and non- capitalized relocation charges; (iii) write-offs of intangibles related to impaired assets; and (iv) without duplication, relocation, severance, unabsorbed overhead and other related costs. Fees: The Debtors agree to pay the Lenders a variety of Fees: -- a $4,500,000 Closing Fee -- a $750,000 Renewal Fee if the Debtors decide to renew the Facility beyond June 2, 2004 -- a 0.375% to 0.75% annual Unused Line Fee payable on every dollar not borrowed -- 0.5% letter of credit fees -- an annual $75,000 DIP Agent's Fee -- when required by the Agent, $850 daily field examination fees Carve Out: The DIP Lenders agree to a $5,000,000 carve-out from their liens to permit, in the event of a default, for unpaid professional fees and disbursements incurred by the Debtors and any statutory committees appointed in the Debtors' chapter 11 bankruptcy cases and for payment of fees owed to the United States Trustee or Court Clerk. $250,000 of the Carve-Out may be applied towards the reasonable fees and disbursements of a Chapter 7 trustee, pursuant to Section 726 of the Bankruptcy Code, in any liquidation of one or more Debtors in a Chapter 7 case or cases. C. Edward Dobbs, Esq., at Parker, Hudson, Rainer & Dobbs LLP in Atlanta and David I. Blejwas, Esq., at Hahn & Hessen LLP, in Manhattan represent the DIP Lenders in WestPoint's chapter 11 cases. * * * Judge Drain authorizes the Debtors, on an interim basis pending a Final DIP Financing Hearing, to draw up to $175,000,000 under the DIP Facility. Judge Drain will convene the Final DIP Financing Hearing at 10:00 a.m. on June 18, 2003. Objections to the DIP Financing arrangement, if any, must be filed and served by 4:00 p.m. on June 17, 2003. ----------------------------------------------------------------- [00009] S&P CUTS WESTPOINT STEVENS RATINGS TO 'D' & ENDS WATCH ----------------------------------------------------------------- NEW YORK, New York -- June 2, 2003 -- Standard & Poor's Ratings Services said today that it lowered the long-term corporate credit rating on Atlanta, Ga.-based textiles manufacturer WestPoint Stevens Inc. to 'D' from 'CCC'. At the same time, the senior unsecured debt rating was also lowered to 'D' from 'CC'. The ratings were removed from CreditWatch, where they were placed on April 4, 2003. About $1.6 billion of debt was outstanding at Dec. 31, 2002. "The rating actions are a result of the company's announcement that it and certain of its U.S. affiliates and subsidiaries, including WestPoint Stevens Inc. I, WestPoint Stevens Stores, Inc., J.P. Stevens & Co., and J.P. Stevens Enterprises, filed voluntary petitions under Chapter 11 of the U.S. bankruptcy code on June 2, 2003," said Standard & Poor's credit analyst Susan Ding. The company's Canadian and European subsidiaries did not file for reorganization. In conjunction with its filing, the company also announced it has arranged commitments for up to $300 million in debtor-in- possession financing, subject to bankruptcy court approval. WestPoint Stevens is a home fashions consumer products company with a line of company-owned and licensed brands for the bedroom and bathroom. The company is a vertically integrated manufacturer of bed linens, towels, and other accessories sold in retail outlets. WestPoint Stevens' products are marketed under the well-known brand names of Martex, Grand Patrician, Vellux, Stevens, and Lady Pepperell, and under licensed brands including Ralph Lauren Home Collection. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com All ratings affected by this rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com under Fixed Income in the left navigation bar, select Credit Ratings Actions. ----------------------------------------------------------------- [00010] FITCH DOWNGRADES WESTPOINT STEVENS' SENIOR NOTES TO 'D' ----------------------------------------------------------------- CHICAGO, Illinois -- June 2, 2003 -- Fitch Ratings has lowered the rating of WestPoint Stevens' $1 billion of senior notes to 'D' from 'CC' following the company's announcement today that it has filed under Chapter 11 of the U.S. Bankruptcy Code. The rating reflects the expectation that noteholders will have a limited recovery, given that they are subordinated to a $667 million secured bank facility, a $165 million second lien facility, and a $160 million receivables securitization facility. Fitch will withdraw the rating after 30 days consistent with its policy on defaulted/bankrupt credits with limited market interest. ----------------------------------------------------------------- [00011] MOODY'S WITHDRAWS THE RATINGS OF WESTPOINT STEVENS, INC. ----------------------------------------------------------------- NEW YORK, New York -- June 3, 2003 -- Moody's Investors Service withdrew the following ratings for Westpoint Stevens, Inc. upon the company's announcement that it and certain of its subsidiaries filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on June 2, 2003: -- $525 million of 7.875% senior unsecured notes due 2005 rated Ca; -- $475 million issue of 7.875% senior unsecured notes due 2005 rated Ca; -- Senior Implied of Caa3; -- Issuer Rating of Ca. The Company filed its petition with the U.S. Bankruptcy Court for the Southern District of New York. The filing entities are: WestPoint Stevens Inc., WestPoint Stevens Inc. I, WestPoint Stevens Stores Inc., J.P. Stevens & Co. and J.P. Stevens Enterprises. The company's Canadian and European subsidiaries did not file for reorganization and normal operations continue. Westpoint Stevens, Inc., based in West Point, Georgia, is a vertically integrated manufacturer and marketer of bed, linens, towels, blankets, comforters, and accessories. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: Professor Stuart Gilson's newest title, "Creating Value Through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups." List Price: $79.95 -- Discounted to $55.96 at http://amazon.com/exec/obidos/ASIN/0471405590/internetbankrupt -------------------------------------------------------------------------