14317 Wed, 04/23/2008 - 12:49pm
WILMINGTON, Del.–Dan River, in Chapter 11 bankruptcy protection, has filed for debtor-in-possession financing—indicating that the principles might be trying to keep the company’s business going, rather than liquidating it.
The company has filed for $32 million in DIP financing that it would obtain from GMAC Commercial Finance, for a term of 13 weeks, subject to extension. In the filing, Dan River said it “will utilize the proceeds of the financing to fund the continuation of the business.” This statement appears to be at odds with industry speculation that GHCL, Dan River’s India-based parent company, is seeking to liquidate Dan River.
The DIP financing will provide Dan River “with immediate and ongoing access to borrowing availability to pay their current and ongoing operating expenses,” the filing said. The credit provided by the financing “will enable (Dan River) to continue to satisfy their vendors, service their customers, pay their employees and operate their business in the ordinary course and in an orderly and reasonable manner to preserve and enhance the value of their estates for the benefit of all stakeholders.”
In a separate filing, G. Rodney Reynolds, Dan River’s senior vice president and chief financial officer, said the company filed Chapter 11 because of the downturn in the home-fashions industry caused by a weak retail economy. In the first quarter, Dan River missed its sales forecast by about $5.3 million and missed its forecast for operating income by $4.6 million. Also, Dan River’s customers began to insist on price decreases from the company, which, in some cases, would reduce the company’s projected gross margins from their current 17 percent to less than 10 percent.
Reynolds also said that, in mid-March, Dan River developed a restructuring plan to refocus its business around a core of high-volume retail customers, and that the plan would require an additional investment by GHCL of from $5 million to $10 million.
“Given the current economic environment, however, GHCL determined that it was not willing to make this additional investment in Dan River,” the Reynolds filing said.
The filing also said Dan River posted 2007 sales of $195.3 million.