It seems that private equity-backed Broder Bros. Co. has gotten its underwear in a bunch, warning of a possible Chapter 11 filing looming in its future if it can't get a majority of its equity holders to trade millions of dollars in debt for equity by mid-May.
The Trevose, Pa.-based distributor of Columbia, Hanes and Fruit of the Loom clothing brands said that it had launched an exchange offer for $225 million in outstanding senior notes due in 2010 on April 17, according to a press release issued by the company on Monday.
Meanwhile, Broder said that if it can't get least 98% of its noteholders (owed $220.5 million in notes) to participate in the exchange offer, which expires on May 14, then it could face a Chapter 11 filing in the near future.
For the fourth quarter ended Dec. 27, Broder reported net sale of $219.5 million, down from $232.7 million for the same period in 2007.
Broder said in
announcing those financial results:
"If the Company is unable to obtain additional trade credit (or otherwise obtain a satisfactory source of inventory), refinance its Senior Notes and/or otherwise obtain sources of near term liquidity, the Company may fail to comply with the covenants in the credit agreement and there may be substantial doubt about the Company's ability to continue as a going concern."
Unfortunately, this isn't the first time those Broder has been exposed to financial problems. The company, majority-owned by buyout firm Bain Capital Inc. after a May 2000 equity purchase, was laid bare in May 2007, when Standard & Poor's had a negative outlook on the company because of its weaker-than-expected operating results and deteriorating credit measures because of higher debt levels. - Carolyn Okomo
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