Malden Mills Reorganizing For Growth and Future Innovation

In the last several weeks, the clamor surrounding Malden Mills and questions surrounding the company's future -- or rumored lack of future -- has reached into the SNEWS® offices from around the globe. As of Monday afternoon, Nov. 19, Malden Mills and its network of banks and lenders providing current financing were engaged in ongoing discussions regarding the best means to reorganize and to restructure the company's debt load, which currently is $140 million.
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In the last several weeks, the clamor surrounding Malden Mills and
questions surrounding the company's future -- or rumored lack of future
-- has reached into the SNEWS® offices from around the globe. As of
Monday afternoon, Nov. 19, Malden Mills and its network of banks and
lenders providing current financing were engaged in ongoing discussions
regarding the best means to reorganize and to restructure the company's
debt load, which currently is $140 million.

"Malden Mills is open, fully operational, and conducting business as
usual," the company stated in a release Nov. 18. "The restructuring
process will be used to secure business operations and finances. The
company will emerge with a strong financial foundation for the future.
Zolfo Cooper LLC a leading management and business advisory firm, has
been working with Malden Mills for the past few months and plans to
continue to provide assistance throughout the reorganization process."

Amid all the rhetoric, rumor, and press release pontification, there
lies truth. SNEWS® dug through its notes and records on Malden Mills
from 1994 (pre-fire) to today, researched public records on Malden, and
interviewed Cesar Aguilar, senior vice president of sales and marketing
worldwide for the Polartec brand, to arrive at the most accurate
answers possible to questions being asked of us.

Though the company is privately held, the following information is as
accurate as you are likely to find regarding Malden Mills, Polartec,
and the current situation:

  • Sales
    for Malden Mills before the fire amounted to $395 million (not $374
    million as is widely reported) and included sales from the now-defunct
    upholstery division that was destroyed by the 1995 fire. Of that $395
    million, $197 million in sales was generated by the upholstery division
    leaving just under $200 million in revenue from Malden's other
    ventures, which included Polartec.
  • Sales
    figures from 2000, around the same time Malden began pursuing
    reorganization and garnered additional financing, amounted to $262
    million. $40 million of that revenue came from the foam division of
    Malden and approximately $222 million was generated by Polartec sales.
  • Sales
    estimates for 2001 show sales declining for Malden, with total revenues
    estimated at $220 million, of which $180 million comes from Polartec
    and $40 million comes from Malden's foam business. Yes, this does means
    sales slipped from 2000 to 2001. Why? A number of factors, including an
    influx of cheap Asian fleece, to which Malden did not react well, and,
    of course, the infamous Foot and Mouth Epidemic, which hacked 25
    percent off Malden's UK sales projections and left it holding to excess
    inventory.
  • It
    is true that Polartec has managed to secure a $17 million contract from
    the military, but this is a contract it has been chasing since 1995 and
    not a sudden shift in business strategy, as some business reports have
    implied. This can only serve to boost the bottom line from this point
    onward.
  • Robert
    Himmel, president of Malden Ventures, believes that the electronic
    textiles side of the business, including its new electric blanket
    (debuting now exclusively in Lands End catalogs), the heated jacket
    created in partnership with The North Face, and anything else that this
    category could become might generate between $50 million to $100
    million in overall sales over the next five years. Of course, SNEWS®Â
    would point out that the only way this will happen is if the company
    dramatically expands the reach in this business category. According to
    a recent report in Home Textiles Today, the U.S. electric blanket
    market represents an at-mill cost of $130 in 2001, of which Sunbeam
    owns about $110 million.
  • Malden's
    lenders include LaSalle Bank of Chicago, Finova Capital of Scottsdale,
    Ariz., First Star Corp. of Milwaukee, and GE Capital.
  • Malden
    is projecting a flat sales picture for 2001/2002, although company
    insiders told SNEWS® it is very likely the company will exceed the $180
    revenue expectations as long as nothing more unexpected, such as Foot
    and Mouth or a terrorist act, occurs.
  • Malden believes now that it can achieve solid 5 percent growth for 2003.

SNEWS® View:
Let's see if we can sum up all the parts for you: Malden realized in
1999 that the costs of the fire had far outstripped its ability to
financially recover under the current debt load and plan. However,
Aguilar is on record as emphatically stating that under no
circumstances is a rumored Ch. 7 liquidation of the company even being
discussed. According to Malden insiders, the banks are in complete
support of Malden and want to be sure the company survives, which makes
sense -- and cents -- to us since an operating Malden Mills is worth a
lot more to the region, its creditors, and its consumers than a few
liquidated bits and scraps of fleece.

We've
spoken to some of Malden's larger customers and, as Malden has
confirmed, they are fully on board in support of the company's plans to
reorganize. Could this mean Ch. 11 reorganization? Certainly, if the
banks and Malden finally decide this is the best way for them to
proceed. But, what everyone needs to realize, is that Ch. 11 or any
other form of reorganization means business as usual for Malden Mills
and Polartec. Of course, we'll go out on a limb here and say, if any
part of the company is up for sales discussions as part of any
reorganization plan, it will only be the foam division. That division
is distracting and not really a relevant part of Malden's Polartec
growth vision. When an official word regarding the specific details of
Malden's reorganization plan is in place, SNEWS® will let you know.

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