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Warnaco files Chapter 11
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June 11, 2001: 3:43 p.m. ET
Apparel maker secures $600M in financing to continue operations
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NEW YORK (CNNfn) - Warnaco Group Inc. filed for Chapter 11 bankruptcy protection Monday as the apparel manufacturer reorganizes in an effort to remain a viable company.
New York-based Warnaco (WAC: unchanged at $0.39, Research, Estimates) -- which manufactures apparel under the Calvin Klein, Ralph Lauren, Oscar de la Renta and other well-known brand names -- blamed the slowing economy, a softening retail environment, increasing competition and growing debt.
Under Chapter 11, a company is protected from creditors while trying to reorganize and again become profitable.
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Warnaco manufactures Calvin Klein jeans and other popular clothing brands (CNN/FILE) | |
Warnaco also said it had secured $600 million in debtor-in-possession financing -- led by Citibank, J.P. Morgan Chase and Bank of Nova Scotia -- that will enable day-to-day operations to continue uninterrupted. The arrangement is subject to bankruptcy court approval.
"With this new financing and our experienced management team, we now have the elements in place to put Warnaco back on the track toward financial stability," Chief Executive Linda Wachner said.
The company said its international subsidiaries in Canada, Mexico, Europe, Latin America and Asia will be largely unaffected by the filing. Customers and distributors should not experience any delays in product shipments, Warnaco said.
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The Chapter 11 filing marks a setback for Wachner, who built Warnaco into a major force in fashion by manufacturing designer-label clothing for the masses.
Wachner, an erstwhile darling of Wall Street who Fortune magazine two years ago called one of corporate America's "most powerful women," encountered troubles in the late 1990s, including legal disputes with Calvin Klein and Fruit of the Loom over licensing.
Auditors warned in April they doubted Warnaco could continue operations, and shareholders filed a lawsuit, alleging the company concealed its true value. Wachner, the company's largest shareholder, owns more than 22 percent of Warnaco.
Trading in Warnaco shares was suspended Monday in view of the bankruptcy filing, the New York Stock Exchange said.
The exchange also suspended the 6 percent convertible trust originated preferred securities of Designer Finance Trust, which traded under the symbol DSH and is a wholly owned subsidiary of Warnaco.
Warnaco's stock, which last traded at 39 cents, has fallen below the exchange's minimum requirement for average share price and market capitalization.
Application to delist the stock from the exchange is pending certain procedures, including possible appeal by the company. 
from staff and wire reports
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