Malden Mills bidding opens at $44 million

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WILMINGTON, Del. (Dow Jones/AP) – Philadelphia private-equity fund Chrysalis Capital Partners was chosen Tuesday to open the bidding at $44 million for Malden Mills Industries Inc., the bankrupt maker of Polartec fleece.

Chrysalis was selected as “stalking horse bidder” over Gordon Bros. Group at a hearing in Worcester, Mass.

Gordon Bros., Malden Mills’ choice as lead bidder, was asking $1.32 million worth of bid protection – money it would collect if it was beaten in the bidding for the Massachusetts company.

In contrast, Chrysalis agreed to offer the same price as Gordon Bros., but asked only $500,000 in expense reimbursement if it doesn’t come out of the Feb. 20 auction a winner.

The official committee of unsecured creditors in Malden Mills bankruptcy objected to Gordon Bros.’ request for a breakup fee and up to $700,000 in expenses if it loses at the auction.

In court papers, lawyers for creditors faulted marketing efforts for Malden Mills, which they said were aimed mainly at financial investors who buy distressed companies, rather than textile competitors.

Gordon Bros. and Chrysalis have been battling over the key bidding position in Malden Mills’ bankruptcy case almost from the time the company filed for Chapter 11 protection in Delaware on Jan. 10.

The new Delaware filing came only 14 hours after a long-running Massachusetts bankruptcy case was officially closed.

U.S. Bankruptcy Judge Joel Rosenthal ordered Malden Mills’ Chapter 11 case brought back to Massachusetts, after creditors complained Malden Mills and GE Capital Commercial Finance misled them about plans to file a second bankruptcy.

Tuesday, he set a fast sale schedule that calls for a deal to buy Malden Mills to be closed by March 5. Bids are due by Feb. 16.

Companies that try to sell assets while in Chapter 11 generally are required to conduct an auction to make sure creditors get the best price.

Malden Mills listed debts of $130.7 million in its Chapter 11 petition.

In ordering the bankruptcy case back to Worcester, Rosenthal noted that most of the company’s creditors, including former chief executive Aaron Feuerstein, are in Massachusetts. Feuerstein gained national recognition when he refused to lay off workers after a catastrophic fire destroyed the mill at its Lawrence, Mass., home base.

AP-ES-01-23-07 1719EST

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