Malden Mills files anew for Ch. 11 reorganization

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BOSTON (AP) – Malden Mills Industries Inc., a century-old textile maker that emerged from bankruptcy in 2003 after a disastrous factory fire, said Wednesday it has filed for Chapter 11 reorganization again and agreed to the company’s sale to a firm that helps troubled companies.

The $44 million sale to Gordon Brothers Group is subject to bankruptcy court approval.

The prospective buyer said it intends to continue operating privately held Malden Mills, which makes Polartec fleece and specialty fabrics for customers including Lands’ End, The North Face, Patagonia and the Pentagon.

The Lawrence-based company has struggled to overcome financial problems left over from its prior bankruptcy, while also competing against foreign textile makers that enjoy lower labor costs.

Malden Mills employs about 1,000 people at its plants in Lawrence and in Hudson, N.H.

“Gordon Brothers is actively pursuing the purchase of the assets of Malden Mills with the intention of continuing the operations of the company,” said Chet Atkins, a spokesman for Gordon Brothers.

The firm specializes in buying, selling and appraising assets of troubled companies, and providing financing to complete buyouts and turnaround efforts.

Malden Mills’ board has unanimously approved the sale to Gordon Brothers. Malden Mills said in a news release that the Chapter 11 process “will provide an efficient environment for completion of the sale.”

The sale to Gordon Brothers “is subject to higher and better offers” during the bankruptcy process, said Malden Mills, which did not indicate whether other offers were pending.

Malden Mills said it expects the sale to be completed by the end of next month, subject to approval of the U.S. Bankruptcy Court in Delaware where it made its Chapter 11 filing.

GE Commercial Finance will provide temporary financing during the Chapter 11 process and ownership transition, Malden Mills said.

Malden Mills CEO Michael Spillane, who took over at the company in 2004, said the sale to Gordon Brothers “transitions the company into a state of permanent ownership and financial stability.”

The company’s earlier bankruptcy filing came in 2001. Malden Mills emerged from Chapter 11 in 2003 and was reorganized under the control of lenders. The company had previously been run for three generations by the Feuerstein family.

Aaron Feuerstein gained national renown for his decision to keep workers on payroll after a December 1995 fire destroyed the company’s main factory. His bid to buy back Malden Mills was rejected by the company’s board in late 2004.

The financial problems that led to the earlier Chapter 11 lingered after the company’s emergence from the process, and Malden Mills faced costs to conduct environmental cleanup after the fire.

“The company came out of the last Chapter 11 with a significant amount of debt still being carried,” said David Costello, a Malden Mills spokesman.

Malden Mills hopes it can emerge from the new Chapter 11 case with improved chances.

“We are in an extremely competitive environment, but we are hopeful this will set the company up for long-term success by operating unburdened,” Costello said.

AP-ES-01-10-07 1207EST

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