Malden Mills made the first significant step to emerge from Ch. 11 protection by filing Aug. 19 a Disclosure Statement for the Joint Plan of Reorganization with the U.S. Bankruptcy Court for the District of Massachusetts.
A hearing to consider the relief sought in the Disclosure Statement will be held 9 a.m. Oct. 9 with those objecting or wishing to modify the disclosure having to make their wishes known in writing by 4:30 pm EST on Sept. 30.
The document filed with the courts is more than 60 pages long, so SNEWS® will do the heavy lifting for you:
- In the plan, Malden is seeking permission to borrow up to $50 million from a "Post-Confirmation Lender" -- meaning a lender or lenders approved by Malden.
- In the Disclosure, those owed money by Malden are divided into various classes, with Class 1 creditors eligible to receive cash in the amount of allowed claims in full satisfaction of the claim. These folks are likely to be the happiest. Class 2 and Class 3 folks will receive promissory notes that commit Malden to repay allowed claims beginning three years from the date of the agreement spread over 28 quarterly payments. These folks are likely reasonably happy as they're getting more than they might otherwise, even if they have to wait. Classes 4 through 7 represent creditors who have agreed to take less than owed and are also likely somewhat happy. Class 8 creditors either get cash settlement or a return of their property held as collateral at Malden's discretion. These folks are likely relatively unhappy if Malden chooses to return collateral. Class 14 is Gorlitz Fleece, Malden's German affiliate. It is receiving a revised supply agreement allowing the company to manufacture a broader range of Polartec product in exchange for forgiving all debt. Gorlitz is likely pretty happy. Class 16 creditors are unsecured claims and these folks are likely downright upset as they are being told they agree to waive all claims.
- It is likely that some version of the Disclosure Statement will be approved and executed by the end of this year or early next year, according to insiders who spoke with SNEWS®.
So what does all this mean for Malden, by the numbers? We've perused the court documents to reveal the following for your reading pleasure:
- Malden currently has just over 700 customers from over 30 countries.
- Projected 2002 sales for Malden are at $171 million through Oct. 2002, with $31 million of that coming via Gorlitz.
- Malden projects that it will lose $7.3 million on sales of $183 million in 2003. Total yards sold are expected to be 24,972, with 5,550 yards coming from Germany and 3,467 yards coming from a yet-to-be-opened Asia facility.
- Malden projects that it will lose $3.2 million on sales of $187 million in 2004. Total yards sold are expected to be 25,986 with 6,684 coming from Asia and 5,827 coming from Germany.
- Malden projects that it will make a profit of $919 thousand on sales of $196 million in 2005. Total yards sold are expected to be 27,098 with 8,413 coming from Asia and 6,410 from Germany.
- What is interesting from 2005 on is that through 2012, Malden projects no yardage production increases for its Lawrence facility, keeping production static at 12,275 yards per year. Asia is the clear great hope for Malden, with projected yards produced reaching 12,180 ion 2012 -- almost even with Lawrence. Germany is projected to increase production incrementally each year, reaching 9,638 yards in 2012.
- By 2012, Malden projects the company will be making a profit of nearly $30 million on sales of $250 million.
SNEWS® View: Though Malden is clearly making a strong play to move out of bankruptcy and back into the world of the living, it still has a tough few months and years ahead of it. First, it must convince creditors that forgiving some or all of a debt is the best way for Malden to be able to make the play the company requires to retain its strength. It is likely most will go along with the Disclosure Plan, amid some requisite grumbling. To not go along with the plan could leave Malden with an option no creditor wants to consider. Once the plan is in place and debts are forgiven either outright or through a restructured payment plan, Malden must demonstrate growth -- something the company has not been able to do over the last several years. Opening Asia will clearly be a boost. And Malden has certainly made great strides in leaning itself and retooling its inner sanctum to improve efficiencies. Bottom line now though is that Malden must demonstrate that if customers belly up to the bar, it can deliver product to them in the quantities and quality ordered in a timely and consistent manner.