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The board of directors of Malden Mills Industries Inc. approved the sale of the company to Gordon Brothers Group of Boston, Mass., for $44 million. At the same time, and to facilitate the sale of the company’s assets, Malden’s lawyers filed a voluntary Chapter 11 bankruptcy petition for reorganization in the U.S. Bankruptcy Court for the District of Delaware.
The Chapter 11 reorganization is being conducted under 363 guidelines, which, our SNEWS® legal experts tell us, is typical when a company is trying to sell all assets, but has debts that might otherwise encumber the sale. Gordon Brothers will act as the stalking horse bidder, which, under the court guidelines for early disposition of the assets, means during the February 2007 auction, higher and better offers will be entertained by the court.
Michael Spillane, CEO of Malden Mills, told SNEWS® that Malden Mills will continue normal manufacturing operations at both its facilities in Lawrence, Mass., and Hudson, N.H., and that customers and employees of Malden will not be affected.
GE Commercial Finance will be providing a Debtor in Possession (DIP) financing facility, which ensures that the Malden will have the working capital required for a seamless transition in operations to new ownership.
“Over the past three years, we have managed to improve all facets of our business,” Spillane told SNEWS®. “What this sale now means to us, and means to our customers, is that the company is transitioning into a state of permanent ownership and financial stability.”
When asked what this means for him, Spillane told SNEWS®, “I am committed into seeing this through, and I want this company to be viable in the long term. I am committed to making sure we end up in the right place.”
SNEWS® View: Naturally, with the hearings regarding the Chapter 11 proceedings and all the legal paperwork flying around, few are talking on the record about anything that is not readily found already in public and court documentation. Fortunately, SNEWS® has been keeping notes and records of conversations, interviews and court documents dating back since before the 1995 fire that triggered all this state of prolonged uncertainty, so we feel comfortable with a bit of speculation in the following paragraphs.
In reviewing the court documents filed with the court at 6:32 a.m. on Jan. 10, 2007, it is not hard to see what Malden needs to do and why the company filed for reorganization. The top two unsecured creditors are Rechtsanwalt Harald Bubhardt of Gorlitz, Germany ($5,562,000), and Aaron Feuerstein, former owner of Malden ($1,560,516). There are others too, such as Outside Magazine for $168,588 and Rodale for $67,914 and Unify for $304,254. But it is clear to us that with the reorg and sale of assets, Malden is wiping old and hanging debts to Bubhardt (click here to read our 2004 story on the closing of that factory) and Feuerstein.
We also would doubt that Malden will leave relationships such as the company enjoys with Outside, Rodale, Unify, etc., to be tarnished by a “we know we owed you money, but we don’t anymore thank you” kiss-off via Chapter 11. While there are legal rules and regulations that must be adhered to, it is not Malden’s nor Spillane’s style to jeopardize relationships…especially when so much is at stake. Though you will likely never read about it, we would expect those that need to be paid will find make-goods in one manner or another over the next year.
For those wondering if this sale was a chance meeting, or if Malden was the instigator, think again. In reviewing the players, we stumbled across the name of one Robert Himmel, who joined Gordon Brothers as a senior vice president in 2002. Himmel worked for Malden prior to that, as director of sales and marketing for Polartec. It is not hard to put two and two together to see it’s likely Gordon Brothers had an inside view of Malden, and its worth, and as a result, most likely approached Malden. And, no doubt, having Himmel on the team made Gordon Brothers a bit more attractive to Malden as well.
As long as we are speculating, indulge us a bit more. Gordon Brothers is by no means new to the game of asset acquisition, nor is it new to dealing with textile companies. It also has a history of entering into strategic partnerships to complete deals. It would not surprise SNEWS® one bit if W.L. Gore emerged as the strategic partner of choice. As long as Malden was operated as a separate brand, such a combination and potential for collaboration and mingling of talents on the fabrics and technology side of the fence would likely make many in the military, and certainly quite a few in the manufacturing community, smile broadly — not everyone we grant you, but likely the majority.
Now our nod to Spillane. We’ve sat down with many CEOs in our time, over beer, coffee, tea and the like. Few have impressed our entire team as has Spillane — accessible, open, honest and direct. We do not believe it would be too bold of a statement to make when we say that without Spillane and the management team he has assembled, we doubt very sincerely if Malden would be in the position of strength it now finds itself. We would imagine that Gordon Brothers, or whatever company or strategic entity ends up with ownership of Malden, would do well to keep Spillane on well into the future.