Kellwood Co. said Monday it is disappointed in the change of heart by bondholder Deutsche Bank AG (DB), which it said had supported a debt exchange before changing its mind on Friday, but Kellwood said it is still negotiating with the bank to try to get breathing room on a rapidly approaching debt maturity.
The company, one of the U.S.'s largest apparel manufacturers, could be forced to file for bankruptcy after it failed to reach an agreement with its bondholders, people familiar with the situation told The Wall Street Journal last week.
Kellwood, which employs about 2,000 people and owns such popular clothing brands as Phat Farm, Sag Harbor and Vince, was taken private in February 2008 by buyout firm Sun Capital Partners Inc. for $542 million. The effects of a heavy debt load and a sharp drop in consumer spending have slammed its financial results.
The company has a $140 million bond issue maturing Wednesday. Unable to refinance the bonds with the tight credit markets, Kellwood hired financial advisers to restructure its debt. It has tried to defer the payment through a so-called exchange offer, in which it would swap the bonds for ones with sweetened terms expiring in 2014. Deutsche Bank, the largest holder of the bonds, elected not to tender to the offer.
Kellwood Chief Executive Michael Kramer said Monday the company was "surprised and disappointed by Deutsche Bank's current position as they were on our bondholder steering committee, helped structure the deal and told us all along that they supported it."
Kramer added the proposed swap comes at a time when the company is performing well, is profitable and has positive cash flow. He said Kellwood is continuing to negotiate with Deutsche Bank and the rest of its bondholders and is looking at other alternatives, but didn't elaborate.
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