========================================================================== FRUIT OF THE LOOM BANKRUPTCY NEWS Issue Number 1 -------------------------------------------------------------------------- Copyright 1999 (ISSN XXXX-XXXX) December 31, 1999 -------------------------------------------------------------------------- Bankruptcy Creditors' Service, Inc., Phone 609-392-0900 FAX 609-392-0040 -------------------------------------------------------------------------- FRUIT OF THE LOOM BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue; newsletters are delivered by e-mail. Reproduction of FRUIT OF THE LOOM BANKRUPTCY NEWS by any means is prohibited without the permission of the publisher. ========================================================================== IN THIS ISSUE ------------- [00000] HOW TO ORDER A SUBSCRIPTION TO FRUIT OF THE LOOM BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF FRUIT OF THE LOOM [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF OCTOBER 2, 1999 [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILINGS [00004] CHAPTER 11 DATABASE CONCERNING DEBTORS' 34 VOLUNTARY PETITIONS [00005] UNOFFICIAL LIST OF THE DEBTORS' LARGEST CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] DEBTORS' MOTION FOR APPROVAL OF $625,000,000 DIP FINANCING PACT KEY DATE CALENDAR ----------------- 12/29/99 Petition Date 01/13/00 Deadline for filing Schedules of Assets and Liabilities 01/13/00 Deadline for filing Statement of Financial Affairs 01/18/00 Deadline to provide Utility Companies with adequate assurance 02/27/00 Deadline to assume or reject leases and executory contracts 03/28/00 Deadline for removal of actions pursuant to F.R.B.P. 9027 04/27/00 Expiration of Debtors' Exclusive Period to propose a Plan 06/26/00 Expiration of Debtors' Exclusive Solicitation Period 06/30/01 Expiration of DIP Financing Facility 12/28/01 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Official Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 U.S.C. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- -------------------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF FRUIT OF THE LOOM -------------------------------------------------------------------------- Fruit of the Loom, Inc. 200 W. Madison Street Suite 2700 Chicago, IL 60606 Telephone (312) 899-1320 http://www.fruit.com Brand names we know for underwear, activewear, casual wear, and children's wear are what the Company is all about: Fruit of the Loom, BVD, Gitano, Pro Player, and Underoos, among others. Fruit of the Loom is a leading international, vertically integrated basic apparel company, emphasizing branded products for consumers ranging from infants to senior citizens. The Company is one of the largest producers of men's and boys' underwear, activewear for the screenprint T-shirt and fleece market, women's and girls' underwear, casualwear, women's jeanswear and childrenswear, selling products principally under the FRUIT OF THE LOOM, BVD, SCREEN STARS, BEST, MUNSINGWEAR, WILSON, GITANO and CUMBERLAND BAY brand names. In addition to undecorated products, the Company offers underwear, sportswear and T-shirts decorated with licensed characters, including STAR WARS, BATMAN, SUPERMAN, SPIDERMAN, LOONEY TUNES, SESAME STREET, SCOOBY-DOO, WOODY WOODPECKER, CURIOUS GEORGE and TELETUBBIES. Under the PRO PLAYER and FANS GEAR brands, the Company also designs, manufactures and markets licensed sports apparel bearing the names, tradenames and logos of the National Football League, the National Basketball Association, Major League Baseball and the National Hockey League, professional sports teams and many colleges and universities, as well as the likenesses of certain popular professional athletes. The Company is a fully integrated manufacturer, performing most of its own yarn spinning, knitting, cloth finishing, cutting, sewing and packaging. anagement considers the Company's primary strengths to be its excellent brand recognition, low cost production resulting primarily from the offshore location of substantially all of its labor-intensive manufacturing operations, and strong relationships with major discount chains and mass merchandisers. In its latest annual report, Management tells investors that consumer awareness of the value, quality and competitive prices of the Company's products will benefit the Company in any retail environment where consumers are value conscious. Fruit of the Loom employs approximately 40,000 people in over 60 locations worldwide. Business Organization The Company has organized its business into four areas: A. Retail Products -- 50% of 1998 Net Sales -- The products included in the retail business are generally sold to major discount chains and mass merchandisers and consist of (i) men's and boys' underwear; (ii) women's and girls' underwear; (iii) domestic casualwear (i.e., undecorated or "blank") T-shirts and fleecewear; (iv) international casualwear T-shirts, 70% of which are sold in Canada, 16% in Mexico and 14% in Japan; (v) women's and girls' jeanswear; and (vi) childrenswear. B. Activewear -- 28% of 1998 Net Sales -- The products included in the activewear business are sold to large wholesale distributors, who break down bulk purchases for resale to the screenprint market and speciality retailers, and consist primarily of T-shirts and fleecewear. C. Licensed Sportswear -- 9% of 1998 Net Sales -- The products included in the licensed sportswear business are distributed in the mass merchant channel and to sports specialty and department stores. D. European Business -- 13% of 1998 Net Sales -- European apparel product offerings generally consist of T-shirts, fleecewear and polo shirts sold to wholesale distributors for resale to the imprint market (63%) and sold to the retail market (37%). These products are sold primarily in Western European countries. Products Within its four business areas, the Company produces a wide range of basic apparel products and believes that price, product quality and responsive delivery are the most important factors in the sale of these products. The Company's products are divided into seven product categories: 1. Men's and Boys' Underwear. The Company offers a broad array of men's and boys' underwear including briefs, boxer shorts, T-shirts and A- shirts, and colored and "fashion" underwear. These products are primarily sold to major discount chains and mass merchandisers. The Company sells all-cotton and cotton-blend underwear under its FRUIT OF THE LOOM and BVD brand names. Products sold under the BVD brand name are generally designed to appeal to a more premium market and are priced higher than those sold under the FRUIT OF THE LOOM brand name. Under its licensing arrangements, the Company manufactures and markets men's and boys' underwear bearing the UNSINGWEAR and KANGAROO trademarks in the United States and certain overseas markets. The Company is one of the market leaders in men's and boys' underwear, with a 1998 domestic market share of approximately 32%. A recent survey found that the FRUIT OF THE LOOM brand was the most recognized of 90 men's apparel brands, with 97% brand awareness. 2. Activewear. The Company produces and sells undecorated T-shirts and fleecewear under the SCREEN STARS brand name and premium fleecewear and T-shirts under the FRUIT OF THE LOOM, LOFTEEZ and BEST BY FRUIT OF THE LOOM labels. These products are manufactured in a variety of styles and colors and are sold to distributors, screenprinters and specialty retailers. anagement believes that the Company is the largest domestic activewear manufacturer and supplier for screenprinters, with a domestic market share of the screenprint T-shirt market of approximately 28% for 1997, the most recent year for which data is available. The Company believes that its 1998 market share was substantially the same as its 1997 market share. 3. Women's and Girls' Underwear. The Company offers a variety of women's and girls' underwear under the FRUIT OF THE LOOM brand name, including cotton, nylon and lycra panties. These products are primarily sold to major discount chains and mass merchandisers. In addition, the Company has granted a license to Warnaco Inc. for the manufacture and sale of bras, slips, camisoles and other products under the FRUIT OF THE LOOM brand name in North America. The Company also licenses the use of the FRUIT OF THE LOOM brand name to a manufacturer of sheer hosiery. The Company is one of the branded market leaders in the fragmented women's and girls' underwear market, with a 1998 domestic market share of approximately 15%. 4. Casualwear. The Company markets undecorated T-shirts and fleece tops, shorts and bottoms to mass merchandisers as casualwear under the FRUIT OF THE LOOM, BVD and MUNSINGWEAR brands. Casualwear is produced in separate Spring and Fall lines, with updated color selections for each of the men's, women's, boys' and girls' categories. 5. Women's Jeanswear. The Company designs, manufactures (including contract manufacturing) and markets women's jeanswear and jeans related sportswear to mass merchandisers under GITANO and other trademarks. In addition to its core GITANO apparel products, the Company licenses the production and sale of a variety of accessories and other products bearing the GITANO trademark. 6. Licensed Sportswear. The Company designs, manufactures and markets sports apparel under licenses granted by major professional sports leagues, professional players and many colleges and universities in the United States. The Company also has licenses with The Walt Disney Company for its ESPN and X-Games properties. The Company sells a wide variety of quality sportswear, including T-shirts, sweatshirts, shorts and outerwear, primarily under the PRO PLAYER and FANS GEAR brands and the WILSON trade- mark. The Company manufactures and markets a wide variety of decorated sportswear to retail stores and mass merchants. Under its PRO PLAYER brand, the Company designs and markets heavyweight jackets, lightweight jackets, headwear and other outerwear and T-shirts and fleecewear bearing the logos or insignia of professional sports and college teams and leagues. 7. Childrenswear. The Company offers a broad array of childrenswear, including decorated underwear (generally with pictures of licensed movie or cartoon characters) under the FUNPALS, FUNGALS and UNDEROOS brand names. Business Strategy * Low Cost Manufacturing. The Company's strategy is to use its automated textile manufacturing facilities in the United States for yarn spinning, knitting, bleaching and dyeing, together with low cost offshore operations for labor- intensive cutting, sewing and finishing activities. This combination allows the Company to optimize its cost structure and offer continued value to its customers. As part of this strategy, over the last three years the Company transferred substantially all of its sewing operations to locations in exico, the Caribbean and Central America. In 1998, over 95% of the Company's garments were sewn offshore, as compared to approximately 12% at the beginning of 1995. The Company estimates that, as a result of the movement of its sewing operations offshore, assembly costs have been reduced by more than $150 million annually. Based on the Company's selling price points and operating margins on its various products, management believes that the Company is one of the lowest cost producers in the markets it serves. * Utilizing Contract Manufacturers. Approximately half of the garments sewn offshore in 1998 were assembled by contract manufacturers, with the remaining half, consisting primarily of large volume styles, assembled at Company-owned and operated facilities. While management believes it has the greatest cost reduction potential at its Company-owned facilities, the Company uses contract manufacturers for the following reasons: (i) to balance internal capacity requirements, (ii) to manufacture low volume specialty garments, (iii) to accommodate seasonal or one-time programs, and (iv) to bridge capacity in the move from domestic plant to offshore plant sewing. The Company has increased its own sewing capacity in Mexico and Central America, and expects to continue to reduce its reliance on contract manufacturing, resulting in further cost reductions. * Developing Product Line Extensions and New Products. The Company continues to expand its existing product lines with variations designed to enhance product demand and increase revenues. Specifically, the Company has responded to the popularity of boxers in the men's and boys' underwear product category by expanding its offerings of boxers and boxer briefs in various patterns and silhouettes. In the women's and girls' underwear category, the Company is introducing new products through its FTL Sport and Close Comfort programs, which feature styles for improved fit and more comfortable feeling fashions. In the childrenswear category, the Company is introducing an updated line of its UNDEROOS brand costume underwear sets in a variety of popular character prints, including new licensing properties such as STAR WARS, SUPERMAN, SPIDERMAN and TELETUBBIES. In addition, the Company is introducing new product variations in its activewear and licensed sportswear categories, including the Company's authentic program with the National Hockey League for team jerseys and uniforms. * Expanding Marketing Programs. The Company's marketing programs emphasize the quality and consistency of the brands it owns and those it licenses from others. anagement is increasing its emphasis on marketing programs, with an enhanced commitment to advertising and promotional programs. In 1996, the Company signed a ten-year agreement to rename Joe Robbie Stadium (home of the Miami Dolphins and Florida Marlins, as well as the 1999 Super Bowl) as Pro Player Stadium. In addition, the Company has launched a new advertising campaign focusing on Fruit of the Loom, BVD and Pro Player products. * Enhancing Information Systems. The Company has committed additional resources to enhance its information systems. This effort has included the development of a new order entry system enabling activewear retailers to order from wholesalers through the Internet and the implementation of Electronic Data Interchange with its major retail customers. In addition, the Company has implemented its Vendor Managed Inventory program, enabling the Company to partner with its customers and allowing these customers to maintain optimal inventory levels. The VMI program and other IS enhancements enable the Company to improve utilization of its own inventories by matching production more closely with customer point of sale information. Marketing and Distribution The Company sells its products to over 10,000 accounts, including all major discount chains and mass merchandisers, wholesale clubs and screenprinters. The Company also sells to many department, specialty, drug and variety stores, national chains, supermarkets and sports specialty stores. In 1998, approximately 83% of the Company's domestic products sold through retail channels were sold to major discount chains and mass merchandisers, approximately 10% were sold to specialty stores, and approximately 7% were sold to department stores. Management believes that if the Company were to lose any one customer, a large percentage of these sales would shift to other outlets due to the high degree of brand awareness and consumer loyalty to the Company's products. The Company's products are principally sold by a nationally organized direct sales force of full-time employees, while certain of the Company's products are sold through independent sales representatives. The Company's products are shipped from five primary distribution centers. anagement states that among the Company's primary strengths are its long- standing excellent relationships with major discount chains and mass merchandisers. These retailers accounted for approximately 64% of the men's and boys' underwear and approximately 61% of the women's and girls' underwear sold in the United States in 1998. During the last several years, many of the Company's principal customers have revamped their inventory and distribution systems, requiring their suppliers to offer more flexible product deliveries. In response to these demands and to enable the Company to better monitor and control its own inventory levels, the Company has made substantial investments in IS and in upgrading its warehousing and distribution capabilities. The Company extensively markets its activewear and, to a lesser extent, other products outside the United States, principally in Europe, Canada, Japan and Mexico. In order to serve these markets, the Company has manufacturing plants in Canada, the Republic of Ireland and Northern Ireland (United Kingdom), as well as manufacturing operations in Morocco where cut fabrics from the Republic of Ireland are sewn and returned to Europe for sale. The FTL-Cayman Reorganization On March 4, 1999, the Company effected a corporate reorganization pursuant to which FTL-Cayman, a Cayman Islands company and formerly a subsidiary of the Company, became the parent holding company of the Company. FTL-Cayman, initially through the Company, continues to conduct the businesses in which the Company was engaged immediately prior to the Reorganization. During the remainder of 1999 and 2000, substantially all of the businesses and subsidiaries of the Company located outside of the United States will be transferred to FTL-Cayman (or direct or indirect foreign subsidiaries of FTL-Cayman), other than certain interests of the Company in Canada and exico and the beneficial ownership of certain trademarks. The Board of Directors of the Company believes that the use of a Cayman Islands holding company for the Company and its subsidiaries will allow the Company to organize business activities to avail itself of certain business, tax and financing advantages that are not available in the United States. In connection with the Reorganization, FTL-Cayman filed with the U.S. Securities and Exchange Commission a registration statement on Form S-4 (Reg. No. 333-46007), which became effective on September 16, 1998. FTL-Cayman is a Cayman Islands company registered and incorporated under the laws of the Cayman Islands on January 23, 1998, which was formed to become the parent holding company of the Company. FTL-Cayman's principal offices are located at P.O. Box 31311 SMB, Safehaven Corporate Center, Grand Cayman, Cayman Islands, BWI, and its telephone number is (345) 949- 6690. Prior to the Reorganization, FTL-Cayman did not have any significant assets or engage in any business or prior activities other than in connection with the Reorganization. As of the date of this Offering Circular, FTL-Cayman's only significant asset is the common stock of Fruit of the Loom, Ltd. -------------------------------------------------------------------------- [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF OCTOBER 2, 1999 -------------------------------------------------------------------------- FRUIT OF THE LOOM, INC., AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) OCTOBER 2, 1999 --------------- ASSETS Current Assets Cash and cash equivalents (including restricted cash).... $ 37,000,000 Notes and accounts receivable (less allowance for possible losses of $10,800,000)... 80,200,000 Inventories Finished goods........................................ 645,200,000 Work in process....................................... 135,800,000 Materials and supplies................................ 52,500,000 -------------- Total inventories................................ 833,500,000 Due from receivable financing subsidiary................. 26,800,000 Other.................................................... 45,400,000 -------------- Total current assets............................. 1,022,900,000 -------------- Property, Plant and Equipment............................ 1,157,200,000 Less accumulated depreciation......................... 745,900,000 -------------- Net property, plant and equipment................ 411,300,000 -------------- Other Assets Goodwill (less accumulated amortization of $356,200)..... 666,300,000 Deferred income taxes.................................... 36,700,000 Other.................................................... 146,500,000 -------------- Total other assets............................... 849,500,000 -------------- $2,283,700,000 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt..................... $ 650,200,000 Trade accounts payable................................... 87,300,000 Other accounts payable and accrued expenses.............. 299,200,000 -------------- Total current liabilities........................ 1,036,700,000 -------------- Noncurrent Liabilities Long-term debt........................................... 682,200,000 Notes and accounts payable -- affiliates................. 438,600,000 Other.................................................... 266,000,000 -------------- Total noncurrent liabilities..................... 1,386,800,000 -------------- Preferred Stock............................................ 71,700,000 -------------- Common Stockholders' Equity (Deficiency)................... (211,500,000) -------------- $2,283,700,000 ============== -------------------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILINGS -------------------------------------------------------------------------- FRUIT OF THE LOOM FILES FOR CHAPTER 11 REORGANIZATION Receives $625 Million in Debtor-in-Possession Financing Chicago, Illinois -- December 29, 1999 -- Fruit of the Loom, Ltd. (NYSE: FTL) announced today that it and certain of its U.S. subsidiaries have filed voluntary petitions with U.S. Bankruptcy Court for the District of Delaware to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The Company said that it initiated the reorganization to obtain working capital and implement a financial and operational restructuring. The Company's foreign subsidiaries are not part of the Chapter 11 filing. As part of the reorganization, the Company announced that one of its bank lenders, Bank of America, N.A., has agreed to provide a new $625 million secured debtor-in-possession ("DIP") credit facility. The Company said that the DIP facility would ensure that it has the short-term capital necessary to continue normal, day-to-day operations such as the purchase materials and inventory, and the payment of suppliers and employees. The Company said that the Chapter 11 filing should have little impact on customers and employees. The Company has sought and expects to receive the Court's approval to pay employee salaries, wages and benefits without interruption. The DIP financing will enable the Company to pay for the post-petition delivery of goods and services and continue to build the inventory necessary to meet the seasonal demand from customers. "The Fruit of the Loom brands are renowned around the world. The Chapter 11 filing is the first step in our effort to address the challenges facing the Company and protect the brand. We are confident that restructuring our operations and capital structure will enable Fruit of the Loom to emerge as a stronger company in the competitive basic apparel industry, and continue to build our reputation for producing quality apparel," said Dennis S. Bookshester, Acting Chief Executive Officer of Fruit of the Loom, Ltd. "Our vendors are our partners, and we feel confident that the vast majority of our suppliers will recognize the value of doing business with us long term." -------------------------------------------------------------------------- [00004] CHAPTER 11 DATABASE CONCERNING DEBTORS' 34 VOLUNTARY PETITIONS -------------------------------------------------------------------------- Debtors: Fruit of the Loom, Inc. Fruit of the Loom, Ltd. NWI Land Management Corp. Union Underwear Company, Inc. Aliceville Cotton Mill, Inc. Fruit of the Loom Arkansas, Inc. The B.V.D. Licensing Corp. FOL Caribbean Corp. Fayette Cotton Mill, Inc. Fruit of the Loom Texas, Inc. Fruit of the Loom Caribbean, Inc. FTL Sales Company , Inc. Union Yarn Mills, Inc. Greenville Manufacturing, Inc. Winfield Cotton Mill, Inc. Martin Mills, Inc. Leesburg Knitting Mills, Inc. Salem Sportsear Corporation Rabun Apparel, Inc. Whitmire Manufacturing, Inc. Fruit of the Loom, Inc. (N.Y. Corp.) Pro Player, Inc. Gitano Fashions Ltd. Jet Sew Technologies, Inc. Union Sales, Inc. Artex Manufacturing Co., Inc. FTL Investments, Inc. FTL Regional Sales Co., Inc. Leesburg Yarn Mill, Inc. Salem Sportswear, Inc. Dekalb Knitting Corp. Fruit of the Loom Trading Company FTL Systems, Inc. Sherman Warehouse Corp. Consolidated Bankruptcy Case No.: 99-4497 (PJW) Petition Date: December 29, 1999 Court: United States Bankruptcy Court District of Delaware Marine Midland Plaza Building 824 Market Street Wilmington, Delaware 19801 Judge: The Honorable Peter J. Walsh Circuit: Third Debtors' Lead Counsel: Mark K. Thomas, Esq. Jeff J. Marwil, Esq. Brian I. Swett, Esq. Harley J. Goldstein, Esq. Brian M. Graham, Esq. Justin M. Hines, Esq. Ronald S. Betman, Esq. Steven S. Blonder, Esq. Howard Lanznar, Esq. Katten Muchin Zavis 525 West Monroe Street Suite 1600 Chicago, IL 60661-3693 (312) 902-5200 Debtors' Local Counsel: Norman L. Pernick, Esq. Mark Minuti, Esq. Adam H. Isenberg, Esq. J. Kate Stickles, Esq. Jeremy S. Ryan, Esq. Brian D. Stewart, Esq. Saul, Ewing, Remick & Saul, LLP 222 Delaware Avenue,Suite 1200 Wilmington, DE 19899 (302) 421-6800 Debtors' Special Counsel for Farley-Related Matters: Luc A. Despins, Esq. Dennis F. Dunne, Esq. Milbank, Terrd, hadley & McCloy LLP 1 Chase Manhattan Plaza New York, NY 10005 U.S. Trustee: John D. "Jack" McLaughlin, Esq. Office of the United States Trustee Curtis Center, 9th Floor West 901 Walnut Street Philadelphia, PA 19106 (215) 597-4411 Restructuring Consultants: Jack McGregor Jim Bonsall Ted Stenger Al Gordon Douglas Werking Jay Alix & Associates 4000 Town Center, Suite 500 Southfield, MI 48075 Financial Advisor: Barry W. Ridings Lazard Freres & Co., LLC 30 Rockefeller Plaza New York, NY 10020 -------------------------------------------------------------------------- [00005] UNOFFICIAL LIST OF THE DEBTORS' LARGEST CREDITORS -------------------------------------------------------------------------- Entity Nature of Debt Amount of Claim ------ -------------- --------------- Bank of America, N.A., as Administrative Agent Prepetition Bank Group Up to $660,000,000 The Chase Manhattan Bank, as Trustee Synthetic Lease Obligation Up to $87,500,000 Senior Bondholders 7% Northwest Notes due 2011 Up to $125,000,000 Senior Bondholders 6.5% FTLI Notes due 2003 Up to $150,000,000 Senior Bondholders 7-3/8% FTLI Notes due 2023 Up to $150,000,000 NationsBank, N.A. and Credit Suisse First Boston Farley Loan Guarantee Up to $65,000,000 Unsecured Bondholders 8-7/8% FTLI Notes due 2006 Up to $250,000,000 Staple Cotton Unspecified Unknown Calcot Ltd. Unspecified Unknown DuPont Akra. Unspecified Unknown Dystar LP Unspecified Unknown Raytex Fabrics, Inc. Unspecified Unknown Compuware Corporation Unspecified Unknown Warwick Baker O'Neill, Inc. Unspecified Unknown Parkdale Mills, Inc. Unspecified Unknown Hohenberg Bros. Co. Unspecified Unknown Elastic Corporation Unspecified Unknown Tubular Textile Machinery Unspecified Unknown anhattan Associates Unspecified Unknown US Label Corp. Unspecified Unknown Rosner & J. Coweb Logistical SRV Unspecified Unknown Bertling Logistics, Inc. Unspecified Unknown Ameritx Yarn LLC Unspecified Unknown Coats American, Inc. Unspecified Unknown Atwood Richards, Inc. Unspecified Unknown ECOM USA Unspecified Unknown GE Capital First Factors Unspecified Unknown Vanguard Supreme Unspecified Unknown Seyer Graphics Unspecified Unknown Interstate Packaging Unspecified Unknown Crowley American Transport Unspecified Unknown Intermec Technologies Corp. Unspecified Unknown SAS Global Logistics Unspecified Unknown agnolia Manufacturing Co. Unspecified Unknown Norrell Unspecified Unknown Clark Container, Inc. Unspecified Unknown Dart Transit Company Unspecified Unknown Civitas Bank Unspecified Unknown Scholler, Inc. Unspecified Unknown Avondale Mills Unspecified Unknown RL Stowe Mills, Inc. Unspecified Unknown CIT Group/Commercial Svcs. Unspecified Unknown Industrial Cartonera Dominicana, S.A. Unspecified Unknown Farmers National Bank Unspecified Unknown Yorkshire America, Inc. Unspecified Unknown -------------------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES -------------------------------------------------------------------------- Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, the Bankruptcy Court directs that the Debtors' 34 chapter 11 cases be consolidated, solely for administrative purposes, under Case No. 99-4497, and that all pleadings and papers be captioned: UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE In re: : Chapter 11 : FRUIT OF THE LOOM, INC., et al., : Case No. 99-4497 (PJW) : Debtors. : Jointly Administered At the First Day Hearing, Judge Walsh made it clear that his order neither contemplates a substantive consolidation of the Debtors' estates nor prejudices the right of any party-in-interest to seek substantive consolidation. -------------------------------------------------------------------------- [00007] DEBTORS' MOTION FOR APPROVAL OF $625,000,000 DIP FINANCING PACT -------------------------------------------------------------------------- At the Petition Date, the Debtors owed approximately $660,000,000 to the Consortium of Prepetition Lenders led by Bank of America, N.A., under their $900,000,000 Prepetition Credit Agreement put in place in 1997. At the Petition Date, no credit to fund on-going working capital needs is available to the Debtors under that facility. The Debtors approached four providers of debtor-in-possession financing in contemplation of these chapter 11 cases, Brian J. Hanigan, Vice President, Treasurer and Assistant Secretary for Fruit of the Loom, Inc., and its affiliated debtors, told Judge Walsh at the First Day Hearing. Those prospective lenders were Bank of American Business Credit, The Chase anhattan Bank, General Electric Capital Corporation and Foothill Capital Corporation. Each of those four prospective lenders submitted a proposal. The Debtors pursued discussions with BofA and GECC. Negotiations culminated in BofA providing a commitment to lend on superior economic and legal terms. "The Debtors have an immediate need to borrow funds for the purpose of meeting necessary expenses . . . in the ordinary course of their businesses and operations," Mark K. Thomas, Esq., told Judge Walsh. Alternative unsecured credit is not available to the company; cash collateral is insufficient to meet the Debtors' on-going working capital needs; the Debtors are unable to locate superpriority financing on more favorable terms. Through June 30, 2001, the $625,000,000 DIP Facility offers Fruit of the Loom, Inc., as the Borrower, access to: (A) a $150,000,000 Term Loan and (B) a $475,000,000 Revolving Credit Facility, including a $125,000,000 Letter of Credit Subfacility. Availability under the Revolving Credit Facility is limited to the lesser of: (i) $475,000,000 and (ii) the sum of: (a) 85% of the Net Amount of Eligible Accounts; plus (b) 65% of Finished Goods Eligible Inventory; plus (c) 50% of Raw Material and Work in Process Eligible Inventory; minus (d) a reasonable reserve established by BofA; minus (e) projected fees balance to Professionals; minus (f) all other reserves BofA believes to be appropriate. Availability on account of Eligible Inventory is capped at $375,000,000. The Debtors and the DIP Lenders contemplate that funds drawn under the DIP Facility will be used to: (A) immediately retire $170,000,000 owed under the Accounts Receivable Securitization Facility implemented under an Amended and Restated Purchase and Contribution Agreement dated as of October 29, 1999 by amd among Union Underwear Company, Inc., Sales Sportswear Corporation and Pro Player, Inc, as the originators, and FTL Receivables Company, Bank of America, N.A., as agent, Banc of America Securities LLC, as the Syndication Agent, lead Arranger and Sole Book Runner, and other lenders named therein; (B) pay up to $28,800,000 of prepetition payroll and payroll taxes; (C) pay bank and professional fees contemplated by the DIP Facility; (D) pay up to $29,000,000 of Prepetition Claims held by Critical Vendors; (E) pay up to $35,700,000 to honor prepetition Customer Promotion and Allowance Program obligations; (F) pay up to $1,000,000 of other prepetition claims to the extent permitted by the Bankruptcy Court; (G) purchase up to $100,000,000 of fresh inventory; (H) pay up to $25,000,000 on account of an Employee Retention Program to the extent authorized by the Bankruptcy Court; and (I) fund up to $30,000,000 of working capital needs for the Debtors' Foreign Subsidiaries. Fruit of the Loom, Ltd., and each of its debtor-subsidiaries guarantees all borrowings under the DIP Facility. To secure the Debtors' repayment of all amounts borrowed under the DIP Facility, the Debtors will grant the DIP Lenders superpriority claims pursuant to 11 U.S.C. Sec. 364(c)(1), a priming senior lien on all unencumbered property (if any) pursuant to 11 U.S.C. Sec. 364(c)(2), and a priming senior lien on all encumbered property pursuant to 11 U.S.C. Sec. 364(d)(1). Any recoveries by the Estates on account of avoidance actions under Chapter 5 of the Bankruptcy Code are not subject to the DIP Lenders' liens. The DIP Lenders agree to a Carve-Out for Professional Fees authorized to be paid pursuant to 11 U.S.C. Secs. 330 and 331 which are incurred by the Debtors and one Committee and for payment of U.S. Trustee and other fees pursuant to 28 U.S.C. Sec. 1930. In the event of a default, the Carve-Out is capped at $5,000,000. Interest on amounts borrowed will accrue, at the Debtors' option, at (i) BofA's Base Rate plus 1% or (ii) BofA's LIBOR Rate plus 2.5%. In the event of a default, the interest rate increases by 2%. In consideration of the financing, the Debtors will pay the DIP Lenders: (1) a $3,906,250 Facility Fee; (2) a $6,250,000 Syndication Fee; and (3) a $250,000 Administration Fee payable on the Closing Date; and (4) a $125,000 Administration Fee payable on each anniversary of the Closing Date. An Unused Line Fee equal to 0.5% per year accrues on all amounts not borrowed by the Debtors. Letter of Credit fees will accrue at a rate of 2% per year. The Debtors will pay all fees and expenses incurred by Latham & Watkins (David G. Crumbaugh, Esq., and Davis S. Heller, Esq., in Chicago, represent BofA) and will pay for any Collateral Appraisals requested by the DIP Lenders. The Debtors covenant with the DIP Lenders that EBITDAR will be no less than: For the Period From Minimum EBITDAR ------------------- --------------- January 2, 2000 to April 1, 2000 $17,681,000 January 2, 2000 to July 1, 2000 $62,260,000 January 2, 2000 to September 30, 2000 $102,991,000 January 2, 2000 to December 30, 2000 $128,445,000 December 31, 2000 to March 31, 2001 $17,681,000 December 31, 2000 to June 30, 2001 $62,260,000 The Debtors further covenant to restrict Capital Expenditures to: For the Period From Maximum CapEx ------------------- ------------- January 2, 2000 to April 1, 2000 $19,191,000 January 2, 2000 to July 1, 2000 $32,252,000 January 2, 2000 to September 30, 2000 $39,736,000 January 2, 2000 to December 30, 2000 $46,000,000 December 31, 2000 to March 31, 2001 $19,191,000 December 31, 2000 to June 30, 2001 $32,252,000 The Debtors' continued employment of Jay Alix & Associates (or another Restucturing Advisor acceptable to BofA) is required by the DIP Lenders. BofA indicates that it intends to syndicate the DIP Facility. The DIP Credit Agreement provides that Eligible Assignees are limited to financial institutions with more than $1,000,000,000 in assets. The Credit Agreement specifically prohibits any entity that has contested any of the Agent's liens from being an Eligible Assignee. Finding that the Debtors do have an immediate need for financing and that the terms of the DIP Facility are reasonable under the circumstances, Judge Walsh granted the Debtors authority to borrow up to $275,000,000 on an interim basis, pending a final hearing at which the Court will consider the Debtors' request, and any objections thereto, for authority to borrow up to the full $625,000,000. *** End of Issue No. 1 ***