NEWS RELEASE
Cone Mills Corporation
Greensboro, NC 27415
For Immediate Release
CONE MILLS RECEIVES OFFER FROM WL ROSS & CO. TO PURCHASE SUBSTANTIALLY ALL OF
THE COMPANY'S ASSETS WITH THE INTENTION TO
CONSOLIDATE AND RATIONALIZE DENIM MANUFACTURING IN THE WESTERN HEMISPHERE
Offer Would be Consummated Pursuant to Section 363
of Chapter 11 of the U.S. Bankruptcy Code
Proposed Transaction to Strengthen Cone Mills' Leadership in Denim and
Enable it to Meet the Challenge of Low-Cost Asian Imports
This Transaction, Coupled with Expected DIP Financing, Will Allow the Company to
Conduct Business As Usual
Necessary Strategic Response to Unfair Trade Practices Devastating
U.S. Textile Industry
Greensboro, NC - September 16, 2003 -- Cone Mills Corporation
(NYSE:COE), the world's leading denim producer, today announced that it has
received an offer from WL Ross & Co. to purchase substantially all of the
assets of the Company. The transaction will enable Cone Mills to strengthen its
leadership in denim and improve its ability to compete in the global textile
marketplace. The transaction would require Cone Mills to file a voluntary
petition for relief under Chapter 11 with the U.S. Bankruptcy Court in the next
several days and is expected to be consummated pursuant to section 363 of
Chapter 11 of the U.S. Bankruptcy Code.
The proposed transaction would be subject to Board and Bankruptcy Court approval
and higher and better offers. The Company expects to complete the transaction
within 90 days.
Following the proposed transaction, WL Ross & Co. plans to operate Cone Denim
and Burlington Industries' Mexican denim operation, which will become part of WL
Ross & Co. following the successful close of its acquisition of Burlington,
expected in October.
Cone Mills expects to maintain a significant U.S. employee base, including a
substantial number of manufacturing jobs. Headquarters will remain in
Greensboro, N.C.
Company Expects to Conduct Business as Usual
Throughout the transaction, Cone Mills expects to conduct business as usual,
with no interruptions in its operations or delays in meeting commitments to its
customers, which include such well-known names as Levi Strauss, The Gap and V.F.
Corporation.
Cone Mills has received proposals from several major financial institutions and
expects to reach an agreement for debtor-in-possession (DIP) financing by the
end of this week, which would be used to fund operations prior to the completion
of the transaction. The DIP financing would be subject to the approval of Cone
Mills' current lending group.
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Reasons for Chapter 11 Filing
During the third quarter of 2003, the Company has experienced a continuing
decline in denim sales coupled with higher raw material costs, resulting in
reduced profit margins and cash flow. As a result of its deteriorating
liquidity, the Company failed to make its scheduled bond interest payment of
$4.1 million on September 15, 2003. The Company has a 30-day grace period before
it is considered in default on its bond indebtedness.
The Company expects to be in a position to disclose the full details of the
proposed transaction with WL Ross & Co. in the next few days. It is not expected
that the proceeds of the proposed transaction will be sufficient to satisfy the
Company's secured indebtedness. As a result, there is not expected to be any
recovery for the Company's shareholders.
Necessary Response to Industry-Wide Impact of Low-Cost Imports
John L. Bakane, Chief Executive Officer of Cone Mills, said "This transaction is
consistent with Cone Mills' operating strategy of migrating to lower-cost
manufacturing platforms and is intended to help ensure that Cone Mills continues
to play a key role in the consolidation and rationalization of denim
manufacturing in the Western Hemisphere. It is a necessary strategic response to
the devastating impact of low cost Chinese imports, as well as the economic
slowdown."
"Unsound trade policies are pummeling the U.S. textile industry. Since January
2002 alone, 50 U.S. textile plants have closed and 30,000 jobs have been lost.
And now we're under assault by a new surge of imported Vietnamese jeans made of
Chinese denim that's been sparked by the recently relaxed trade agreement with
Vietnam, which, in turn, has caused a severe imbalance in U.S. denim supply and
demand in the last four months. Making matters worse are the retail inventory
liquidations now under way and continued price deflation even in the face of
higher cotton costs. While we returned the Company to profitability in 2002, the
events of this year have been such that we simply cannot support our present
capital structure in the face of current market conditions."
About Cone Mills
Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC, is the
world's largest producer of denim fabrics and one of the largest commission
printers of home furnishings fabrics in North America. Manufacturing facilities
are located in North Carolina and South Carolina, with a joint venture plant in
Coahuila Mexico.
This release includes forward-looking statements, as defined
in the Private Securities Litigation Reform Act of 1995, reflecting
management's current analysis and expectations, based on what
management believes to be reasonable assumptions. These forward-looking
statements include statements relating to our anticipated financial
performance and business prospects. Statements preceded by, followed by
or that include words such as "believe," "anticipate," "estimate,"
"expect," "would," and other similar expressions are to be considered
such forward-looking statements. Forward-looking statements may involve
known and unknown risks, uncertainties and other factors, which may
cause the actual results to differ materially from those projected,
stated or implied, Accordingly, there can be no assurance that the
Company will meet future results, performance or achievements expressed
or implied by such forward-looking statements. This paragraph is
included to provide safe harbor for forward-looking statements, which
are not generally required to be publicly revised as circumstances
change, and which the Company does not intend to update.
http://www.cone.com
Contacts:
Michael Gross Nyssa Tussing
212.484.7721 212.484.7966
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