For Immediate Release
Forstmann & Company, Inc. to Facilitate Sale or Merger Through Chapter 11 Filing
Receives $50 Million in DIP Financing
New York, NY -- July 23, 1999 -- Forstmann & Company, Inc. (OTCBB:FSMN) one
of the largest and oldest (Founded in 1904) wool fabric producing firms in the
U.S. announced today that it has filed a voluntary petition for protection under
Chapter 11 of the U.S. Bankruptcy Code. The purpose of commencing a Chapter 11
case was to achieve its long-term objectives which may include a merger, new
equity investment, or sale of the Company.
The Company also reached an agreement with its bank group, led by Bank of
America, to provide a $50 million debtor-in-possession line of financing at the
outset. Forstmann believes this amount will be more than sufficient to meet its
continued operating needs. The Company also said that it has retained (subject
to Bankruptcy Court approval) the New York-based investment banking firm of
Butler, Chapman & Co., Inc. to assist it in identifying potential buyers, merger
partners and or investors. In that regard the Company has hired Richard Redden
of the turnaround consulting firm of OSNOS Associates, Inc., based in New York
and Charlotte, N.C., who will serve as Interim Chief Operating Officer to assist
in completing its organization.
Rod Peckham, president of Forstmann, said that the Company had discussions
with several interested parties to merge, acquire or make an equity investment
in the business. He said that the filing will allow the Company to eliminate
significant recurring liabilities, which have served as an impediment to these
opportunities and to effect a restructuring and redirection of the Company from
a product driven commodity-based entity to a market driven niche supplier of
finished goods.
The filing will also allow the Company to continue to operate while it
pursues these various opportunities and to meet its obligations to employees,
customers and vendors. He said that, with the Company's new financing in place,
customers can be assured of continued good service and vendors can be assured of
receiving timely payment for goods and services received after today's filing
date.
Mr. Peckham said that after exploring all available alternatives, the board
concluded that a voluntary Chapter 11 proceeding was the only viable alternative
for the Company to achieve its Long-term objectives.
"The companies that survive in this industry in the future will fall into two
categories," he said. "(1) Large companies that can compete worldwide through
economies of scale, global sourcing and selling opportunities and that are well
capitalized to ride the global ups and downs and; (2) niche market suppliers
that supply products to serve limited specific market needs through good
customer service, innovation, good price-value and that offer the retailer the
low inventory, quick response that it requires. When properly reorganized, we
are confident that we can successfully compete in those niche markets and
produce a reasonable return for our stakeholders."
Mr. Peckham said the Company's current customers and retailers have
maintained a favorable perception of the Company and have expressed a need for
its capacity, quality and product as a U.S. supplier for U.S. and 807 companies.
He said that several large retailers have told the Company that they see major
opportunities in new wool products through purchased packages using Forstmann
fabrics and their joint testing and development.
"Despite the fact that U.S. wool consumption was up in 1997/1998 by 2-3% per
capita, U.S. wool fabric producers saw an average decline of over 15% in market
demand," Mr. Peckham said. "There were a number of reasons for this excess
worldwide capacity. First, the market experienced added capacity in areas like
Mexico, Turkey and Korea. This resulted in the dumping of wool fabrics at below
cost to generate hard currency and keep employees working. Second, the market
was also adversely affected by the Asian financial collapse and resulting
devaluations of their currency. This resulted in reduced consumption in Asia and
the dumping of products by Asian producers at low prices on the world markets.
Other contributing factors include recent warm winter trends to casual dress for
men and women and the resultant lower demand for suiting, and the increased use
of high tech synthetics in winter apparel."
Mr. Peckham said that over the past 12 months, the Company has taken
extensive measures to reduce costs and increase competitiveness. "Through
headcount reductions and plant and office consolidations we have reduced our
operating costs by $55 million per year. This effort has included the entire
organization with $40 million reductions in personnel, $5 million in corporate
overhead and $10 million in plant related cost and expenses," he stated.
"Chapter 11 allows us to continue to move forward with our planned
improvements to the business and pursue these other objectives at the same
time," he stated. "With the support of our customers and vendors and the hard
work of our employees, we are confident that we will be able to emerge from this
process a stronger, more competitive company."
Peckham said that while it completes its restructuring, the Company's
plants, sales and design staffs will continue to do business as usual. The
Company said that it has the support of its lenders in moving forward, and
expects that -- given the new financing and the priority status accorded to
vendors who ship after the filing date -- "the vendor community will support us,
as well."
"The action we took today not only enhances our ability to meet our
obligations to customers and suppliers, but puts the business in a far better
position to capitalize on future opportunities," Mr. Peckham said.
Forstmann & Company voluntarily filed a petition of reorganization under
Chapter 11 in U.S. Bankruptcy Court for the Southern District of New York. It is
represented in the bankruptcy case by the law firm of Salans Hertzfeld Heilbronn
Christy & Viener. Forstmann & Company has manufacturing facilities in Georgia
and is headquartered in New York. Forstmann designs, manufactures and markets
woolen and worsted fabrics for men's and women's sportswear, coating, and
specialty products. Its wholly owned subsidiary, Forstmann Apparel, Inc., also
headquartered in New York, designs, markets and distributes women's suits and
has the North American license for Oleg Cassini's women's suits.
Note:
- ----
This press release may include statements that constitute "forward-looking"
statements. These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that would cause
or contribute to such differences include, but are not limited to, continued
acceptance of the Company's products in the marketplace, competitive factors,
dependence upon third-party vendors, and other risks detailed in the Company's
periodic report filings with the Securities and Exchange Commission. By making
these forward-looking statements, the Company undertakes no obligation to update
these statements for revisions or changes after the date of this release.