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Disclosure Statement |
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Entities: |
Anthracite Capital Inc.; Automatic Data Processing, Inc.; Bank of Nova Scotia; Bear, Stearns & Co. Inc.; Citibank, NA; Dow Jones & Co.; Earl Scheib, Inc.; Ford Motor Credit Co.; FTI Consulting, Inc.; National Westminster Bank plc; Panavision Inc.; Playboy Enterprises, Inc.; PNM Resources, Inc.; Polo Ralph Lauren Corp.; ProLogis; Revlon, Inc.; Salomon Smith Barney Inc.; SIGA Technologies, Inc.; Vornado Realty Trust; Warnaco Group, Inc.; Wells Fargo Bank Minnesota, NA; Brown University; Columbia University; Harvard University; New York University; University of Virginia; Williams College; Bank of America, NA; Dewey Ballantine LLP; Katten Muchin Zavis Rosenman; Paul, Weiss, Rifkind, Wharton & Garrison; Shearman & Sterling; Skadden, Arps, Slate, Meagher & Flom LLP; Weil, Gotshal & Manges LLP |
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Date: |
2002 |
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Preview shows 44KB of 1445KB total |
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$99 |
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#400936 |
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{TYPE}EX-3
{SEQUENCE}5
{FILENAME}ex99-3.txt
{DESCRIPTION}EXHIBIT 99.3
{TEXT}
{PAGE}
J. Ronald Trost (JT-4745)
Kelley A. Cornish (KC-0754)
Shalom L. Kohn (SK-2626)
Elizabeth R. McColm (EM-8532)
SIDLEY AUSTIN BROWN & WOOD LLP
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 839-5300
Counsel for Debtors and Debtors-in-Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - x
: Chapter 11
In re: :
: Case Nos. 01-41643 (RLB)
: through 01-41680 (RLB)
THE WARNACO GROUP, INC., et al., :
:
: (Jointly Administered)
Debtors. :
:
- - - - - - - - - - - - - - - - - - - - - - - - x
DISCLOSURE STATEMENT PURSUANT TO
SECTION 1125 OF THE BANKRUPTCY CODE
WITH RESPECT TO THE FIRST AMENDED JOINT PLAN
OF REORGANIZATION OF THE WARNACO GROUP, INC. AND
ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Dated: New York, New York
November 8, 2002
================================================================================
THIS DISCLOSURE STATEMENT HAS NOT YET BEEN APPROVED BY THE
BANKRUPTCY COURT AND, THEREFORE, IN ACCORDANCE WITH 11 U.S.C. 'SS'
1125, THIS DISCLOSURE STATEMENT SHOULD NOT BE CONSTRUED AS SOLICITING
ACCEPTANCES OF THE FIRST AMENDED PLAN UNTIL IT HAS BEEN SO APPROVED.
================================================================================
{PAGE}
Table of Contents
{TABLE}
{CAPTION}
Page
----
{S} {C}
INTRODUCTORY STATEMENT/DISCLAIMER.............................................................................2
I. EXECUTIVE SUMMARY........................................................................................4
A. Overview of Chapter 11 Filing.......................................................................4
B. The Debtors.........................................................................................5
C. The Disclosure Statement; Voting Requirements.......................................................6
D. Sources of Information..............................................................................8
E. General Structure of the Plan.......................................................................8
F. Summary of the Treatment Under the Plan of Holders of Claims and Interests.........................13
G. Conditions to Effectiveness of the Plan............................................................16
II. DESCRIPTION OF THE DEBTORS..............................................................................16
A. Background Information Regarding the Debtors.......................................................16
1. Overview of History and Operations...........................................................16
2. Pre-Petition Capital Structure...............................................................19
(a) Pre-Petition Secured Indebtedness......................................................19
(b) 6% Convertible Trust Originated Preferred Securities and 6%
Convertible Common Securities..........................................................21
(c) Group Common Stock.....................................................................23
B. The Debtors' Operations in Chapter 11..............................................................24
1. Overview of the Debtors' Operations and Business Plan........................................24
2. Parties-in-Interest; Retention of Professionals and Appointment of Creditors' Committee......25
(a) Advisors to the Debtors................................................................25
(b) The Creditors' Committee and its Advisors..............................................26
(c) United States Trustee..................................................................26
3. Operating Results During Chapter 11..........................................................26
4. Summary of Significant Orders Entered and Other Actions Taken
During the Cases.............................................................................28
(a) Significant "First Day" Orders.........................................................28
(i) Interim DIP Financing............................................................28
(ii) Interim Order Employing Antonio C. Alvarez II as Chief Restructuring Officer.....29
(iii) Employee Matters.................................................................29
(iv) Cash Management System...........................................................30
(v) Reclamation Claims...............................................................30
(vi) Pre-Petition Shipping Charges....................................................30
(vii) Essential Trade Creditors and Licensees..........................................30
(viii)Pre-Petition Customer Accommodation Programs.....................................31
(ix) Payment of Pre-Petition Sales, Use and Other Taxes...............................31
(x) Warnaco of Canada................................................................31
{/TABLE}
i
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(continued)
{TABLE}
{CAPTION}
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{S} {C}
(b) Debtor-In-Possession Financing.........................................................31
(c) Change In Chief Executive Officer......................................................32
(d) Exclusivity Orders.....................................................................32
(e) Sales of Certain Real and Personal Property............................................32
(f) Store Closing Sales....................................................................33
(g) Sale of Business Units.................................................................33
(h) Orders and Claims Relating to the Debtors' Employees and Executives....................34
(i) "First Day" Order to Pay Employee Wages, etc.....................................34
(ii) Employee Retention Plan..........................................................35
(iii) Rejection of Wachner Employment Agreement. ......................................35
(iv) Antonio C. Alvarez II Employment Agreement.......................................36
(i) Claim by ILGWU National Retirement Fund for Withdrawal Liability
Under MultiEmployer Pension Plan Under ERISA...........................................37
(j) Administrative Orders - Schedules; Bar Date............................................38
(k) Other Legal Proceedings................................................................39
(i) Speedo Litigation................................................................39
(ii) Shareholder Class Actions........................................................40
(iii) SEC Investigation................................................................41
(l) Restatement of Financial Statements....................................................42
(m) Property Leases........................................................................42
(n) Personal Property Leases and Executory Contracts.......................................43
(o) Termination of License Agreement with Weight Watchers..................................43
(p) Termination of Fruit of the Loom License...............................................44
(q) Customs Duties.........................................................................44
(r) Transaction with Floor Ready Apparel...................................................46
(s) Administrative Claims..................................................................47
5. Settlement of Significant Claims.............................................................47
(a) Bancomext Claim....................................................................... 47
(b) Amster Claim...........................................................................49
(c) HIS Claim..............................................................................49
(d) GE Capital Secured Claims..............................................................50
6. Current Executive Officers and Directors.....................................................52
(a) Antonio C. Alvarez II..................................................................52
(b) James P. Fogarty.......................................................................52
(c) Stanley P. Silverstein.................................................................53
(d) Stuart D. Buchalter....................................................................53
(e) Joseph A. Califano, Jr.................................................................53
(f) Donald G. Drapkin......................................................................53
(g) Richard Karl Goeltz....................................................................54
(h) Harvey Golub...........................................................................54
(i) Dr. Manuel T. Pacheco..................................................................54
{/TABLE}
ii
{PAGE}
Table of Contents
(continued)
{TABLE}
{CAPTION}
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{S} {C}
(j) Linda J. Wachner.......................................................................54
III. FUTURE BUSINESS OF THE REORGANIZED DEBTORS..............................................................54
A. Structure and Business of the Reorganized Debtors..................................................54
B. Executive Officers and Directors of the Reorganized Debtors........................................55
C. Projected Financial Information....................................................................55
1. Risk Factors.................................................................................56
(a) Adverse Retail Industry Conditions.....................................................56
(b) Fluctuations in Price, Availability and Quality of Raw Materials.......................56
(c) Relationships with Suppliers and Vendors...............................................57
(d) Relationships with Customers...........................................................57
(e) Substantial Competition................................................................57
(f) Licensing Risks........................................................................57
(g) Changing Fashion Trends................................................................58
(h) International Operations...............................................................59
(i) Fluctuations in Foreign Exchange Rates.................................................59
(j) Import Restrictions....................................................................59
(k) Dependence on Key Personnel............................................................60
IV. SUMMARY OF THE PLAN OF REORGANIZATION...................................................................60
A. Brief Explanation of Chapter 11 Plan of Reorganization.............................................60
B. Structure of the Plan..............................................................................61
C. Classification and Treatment of Claims and Interests...............................................63
1. General......................................................................................63
2. Treatment of Unclassified Claims.............................................................64
(a) Administrative Claims..................................................................64
(b) Priority Tax Claims....................................................................65
(c) DIP Facility Claim.....................................................................65
3. Treatment of Classified Claims and Interests.................................................66
D. Conditions to Effective Date.......................................................................70
E. Executory Contracts and Unexpired Leases...........................................................70
1. General......................................................................................71
2. Assumption and Rejection of Executory Contracts and Unexpired Leases.........................71
3. Payments Related to Assumption of Executory Contracts and Unexpired Leases...................72
4. Post-Petition Contracts and Leases...........................................................72
5. Rejection Damages Bar Date...................................................................72
F. Implementation of the Plan.........................................................................73
1. Pre-Effective Date Management and Operation of Debtors.......................................73
2. Post-Effective Date Committee; Dissolution of Committee......................................73
{/TABLE}
iii
{PAGE}
Table of Contents
(continued)
{TABLE}
{CAPTION}
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----
{S} {C}
3. Merger of Certain Debtors....................................................................74
4. Amended Certificates of Incorporation and Bylaws.............................................74
5. Post-Effective Date Management and Operation of Reorganized Debtors..........................74
6. Repayment of DIP Facility/Exit Financing.....................................................75
7. Issuance of New Warnaco Second Lien Notes....................................................75
8. Issuance of New Warnaco Common Shares........................................................76
9. Adoption of Rights Plan......................................................................77
10. Registration Rights Agreement................................................................77
11. Management Stock Incentive Program and Confirmation Bonuses..................................81
12. Continuation of Pension Plan.................................................................82
13. Employment, Retirement, and Incentive Compensation Plans and Programs........................83
G. Distributions Under the Plan.......................................................................83
1. Distributions................................................................................83
(a) Distributions to Holders of Senior Secured Bank Claims.................................83
(b) Distributions to Holders of Allowed Class 5 Claims.....................................83
(c) Distributions to Holders of TOPrS Claims, if Any.......................................84
(d) Fractional Interests...................................................................85
(e) Disputed Claims and Payments...........................................................86
(f) Unclaimed Property.....................................................................86
H. Procedure For Determination of Claims and Interests................................................86
I. Effect of the Plan on Claims and Interests.........................................................87
J. Miscellaneous Provisions...........................................................................90
K. Exemption From Securities Laws.....................................................................92
(a) Initial Offer and Sale of Securities...................................................92
(b) Subsequent Transfers of Securities.....................................................93
(c) Certain Transactions by Stockbrokers...................................................94
V. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................95
A. General Tax Considerations.........................................................................95
B. Tax Consequences of the Plan on the Debtors........................................................95
C. Federal Income Tax Consequences to U.S. Holders of Certain Claims..................................98
VI. CONFIRMATION OF THE PLAN UNDER THE CODE................................................................102
A. The Confirmation Hearing and Objections...........................................................102
B. Confirmation Requirements Under the Code..........................................................102
C. Satisfaction of Conditions Precedent to Confirmation Under the Code...............................105
1. Acceptance by Impaired Classes..............................................................105
2. Best Interests of Claim Holders.............................................................106
(a) Generally.............................................................................106
(b) Enterprise Valuation of the Reorganized Debtors.......................................107
{/TABLE}
iv
{PAGE}
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(continued)
{TABLE}
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{S} {C}
(c) Liquidation Value of the Debtors......................................................108
(d) Application of the Best Interests Test................................................109
(i) Class 2 Senior Secured Bank Claims..............................................109
(ii) Class 5 Allowed Unsecured Claims................................................111
(iii) Class 6 TOPrS Claims............................................................111
(iv) Class 8 Common Stock Claims and Interests.......................................111
(v) Best Interests Test Conclusion..................................................111
3. Feasibility of the Plan.....................................................................112
4. Confirmation Without Acceptance by All Impaired Classes ("Cramdown")........................113
VII. ALTERNATIVES TO THE PLAN...........................................................................114
VIII. RECOMMENDATION.....................................................................................115
IX. CONCLUSION.........................................................................................115
{/TABLE}
v
{PAGE}
INTRODUCTORY STATEMENT/DISCLAIMER
This Disclosure Statement contains a summary of certain provisions of
the First Amended Joint Plan of Reorganization dated as of ________ __, 2002
(the "Plan")(1) proposed by The Warnaco Group, Inc. ("Group") and certain
subsidiaries of The Warnaco Group, Inc., as debtors and debtors-in-possession
(collectively, the "Debtors"), and summaries of certain other documents relating
to the consummation of the Plan or the treatment of certain parties in interest,
and certain financial information relating thereto.
While the Debtors believe that the summaries contained herein provide
adequate information with respect to the documents summarized, such summaries
are qualified to the extent that they do not set forth the entire text of such
documents. Before casting a ballot, each holder of an impaired claim entitled to
vote on the Plan should review all pertinent documentation, including the Plan.
The terms of the Plan govern in the event of any inconsistency with the
summaries contained in this Disclosure Statement.
No party is authorized by the Debtors to provide any information to
the Debtors' creditors with respect to the Plan other than that contained in
this Disclosure Statement. Other than as set forth in this Disclosure Statement,
the Debtors have not authorized any representations concerning the Debtors,
their anticipated financial position or operations after confirmation of the
Plan or the value of their business and property. To the extent information in
this Disclosure Statement relates to the Debtors, the Debtors or their advisors
have provided the information in this Disclosure Statement.
The information in this Disclosure Statement is being provided solely
for purposes of voting to accept or reject the Plan or objecting to Confirmation
of the Plan. Nothing in this Disclosure Statement may be used by any person or
entity for any other purpose.
The deadline for receipt by the Debtors' voting agent, Bankruptcy
Services, LLC, of ballots voting to accept or reject the Plan is 4:00 p.m.,
Prevailing Eastern Time, on [_______, 2002], unless extended in writing by the
Debtors or order of the Bankruptcy Court.
Nothing contained in this Disclosure Statement, express or implied, is
intended to give rise to any commitment or obligation of the Debtors or confers
upon any person any rights, benefits or remedies of any nature whatsoever (other
than as set forth in the Plan), nor should the contents of this Disclosure
Statement be construed as providing any legal, business, financial or tax
advice. Holders of claims and interests should consult with their own advisors.
The contents of this Disclosure Statement shall not constitute or be construed
as an admission of any fact or liability, stipulation or waiver, but rather as a
statement made in settlement negotiations.
Except as hereafter noted, the information contained herein is
generally intended to describe facts and circumstances only as of the date of
this Disclosure Statement, and neither the delivery of the Disclosure Statement
nor the Confirmation of the Plan will create any implication, under any
circumstances, that the information contained herein or therein is correct
----------
(1) Capitalized terms not defined herein have the meanings ascribed to them in
the Plan unless otherwise noted.
2
{PAGE}
or complete at any time after the date hereof or thereof, or that the Debtors
are or will be under any obligation to update such information in the future.
11 U.S.C. 'SS' 1125(b) prohibits the solicitation of an acceptance
or rejection of a plan of reorganization from a holder of a claim or interest
with respect to such claim or interest unless, at the time of or before such
solicitation, there is transmitted to such holder such plan or a summary of such
plan and a written disclosure statement approved, after notice and hearing, by
the Bankruptcy Court as containing adequate information.
This Disclosure Statement has not been approved or disapproved by, and
the securities offered hereby have not been registered with or approved or
recommended by, the Securities and Exchange Commission (the "SEC") or any
securities regulatory authority of any state, nor has the SEC nor any state
securities regulatory authority passed upon the accuracy or adequacy of this
Disclosure Statement or the statements or information contained herein. Any
representation to the contrary is a criminal offense.
This Disclosure Statement contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are made pursuant to the safe harbor provisions of 11 U.S.C. 'SS'
1125 reflecting, when made, expectations or beliefs concerning future events
that involve risks and uncertainties, including the ability of the Debtors to
satisfy the conditions and requirements of their credit facilities, the effects
of the Cases on the operations of the Debtors, the Debtors' ability to obtain
court approval with respect to motions in the Cases prosecuted by them from time
to time, the ability of the Debtors to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to the Cases, the
effect of national, international and regional economic conditions, the overall
level of consumer spending, the performance of the Debtors' products within the
prevailing retail environment, customer acceptance of both new designs and newly
introduced product lines, financial difficulties encountered by customers, the
ability of the Debtors to attract, motivate and retain key executives and
employees and the ability of the Debtors to attract and retain customers.
All statements other than statements of historical facts included in
this Disclosure Statement, without limitation, are forward-looking statements.
Although the Debtors believe that the expectations reflected in such
forward-looking statements are reasonable, they can give no assurance that such
expectations will prove to have been correct. The Debtors disclaim any intention
or obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These forward-looking
statements may contain the words "believe", "anticipate", "expect", "estimate",
"project", "will be", "will continue", "will likely result" and other similar
words and phrases. Forward-looking statements and the Debtors' plans and
expectations are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated, and the Debtors'
business in general is subject to certain risks that could affect the value of
the Debtors' stock.
The unaudited projections attached hereto as Exhibit E (the
"Projections") have been prepared by the Debtors as projections of possible
future results based upon the assumptions set forth therein, and are dependent
on many factors over which the Debtors do not have control. No assurance can be
given that any of the assumptions on which the Projections
3
{PAGE}
are based will prove to be correct. The Projections were not prepared in
compliance with (i) published guidelines of the SEC, (ii) the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or (iii) generally accepted accounting principles ("GAAP"). Neither
Deloitte & Touche LLP ("Deloitte & Touche"), the independent auditors for the
Debtors, nor BDO Seidman, LLP ("BDO Seidman"), the Debtors' bankruptcy
consultant and financial advisors, has participated in the preparation of or
compiled such Projections and, accordingly, neither party expresses any view,
opinion or any other form of assurance with respect to, assume no responsibility
for and disclaim any association with, such Projections. In connection with its
enterprise valuation of the Reorganized Debtors, BDO Seidman, did, however,
perform certain procedures that included evaluating selected assumptions
underlying the Projections relating to revenues and EBITDAR.(2) See Section
VI.C.2.(b), entitled "Best Interests of Claim Holders - Enterprise Valuation of
the Reorganized Debtors." While presented with numerical specificity, such
Projections are based upon a variety of assumptions, which may not be realized,
relating to the future business and operations of the Debtors and are subject to
significant uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of the Debtors. To the extent
that actual results vary from the assumptions, recoveries may vary from the
Projections. The Debtors do not make any express or implied representation or
warranty as to the attainability of the projected financial information set
forth in the Projections or as to the accuracy or completeness of the
assumptions from which that projected information is derived.
I. EXECUTIVE SUMMARY
A. Overview of Chapter 11 Filing
The Warnaco Group, Inc., a Delaware corporation, and certain of its
subsidiaries, as debtors and debtors-in-possession, transmit this Disclosure
Statement (the "Disclosure Statement") pursuant to Section 1125(b) of title 11,
United States Code, 11 U.S.C. 'SS''SS' 101 et seq. (the "Code"), to all known
impaired creditors of the Debtors entitled to vote on the Plan in connection
with the solicitation of acceptances of the Plan. A copy of the Plan, which has
been filed with the United States Bankruptcy Court for the Southern District of
New York (the "Bankruptcy Court"), is annexed hereto and made a part hereof as
Exhibit A.
On June 11, 2001 (the "Petition Date"), each of the Debtors filed a
voluntary petition for reorganization under chapter 11 of the Code. During the
Cases, the Debtors' management has continued to manage the operation and affairs
of the Debtors as debtors-in-possession under the jurisdiction of the Bankruptcy
Court. The Cases currently are pending before the Honorable Richard L. Bohanon,
United States Bankruptcy Judge for the Southern District of New York.
Chapter 11 is the principal business reorganization chapter of the
Code. Under chapter 11 of the Code, a debtor is authorized to reorganize its
business for the benefit of its creditors and stockholders. In addition to
permitting rehabilitation of the debtor, another goal of chapter 11 is to
promote equality of treatment of creditors and equity security holders of equal
----------
(2) EBITDAR is defined as earnings before interest, taxes, depreciation,
amortization, restructuring charges and other items as set forth in the DIP
Credit Agreement.
4
{PAGE}
rank with respect to the restructuring of debt. Recognizing the need for
representation of unsecured creditors in the reorganization process, Section
1102 of the Code provides for the establishment of a creditors' committee. The
Creditors' Committee in the Cases, initially comprised of nine creditor
representatives, was appointed by the United States Trustee for the Southern
District of New York on June 19, 2001.
Confirmation and consummation of a plan of reorganization are the
principal objectives of a chapter 11 reorganization case. A plan of
reorganization sets forth the means for satisfying claims against, and interests
in, a debtor. Confirmation of a plan requires, among other things, the
affirmative vote of creditors holding at least two-thirds in total dollar amount
and more than one-half in number of the allowed claims in each impaired class of
claims that have voted on the plan, and two-thirds in amount of equity interests
in each impaired class of interests that have voted on the plan. Section 1129(b)
of the Code, commonly referred to as the "cramdown" provision, permits
confirmation of a plan over the objection of an impaired class under certain
circumstances. Confirmation of a plan of reorganization by a bankruptcy court
makes the plan binding upon the debtor, any issuer of securities under the plan,
any person acquiring property under the plan and any creditor or equity security
holder of the debtor. Subject to certain limited exceptions, the confirmation
order discharges the debtor from any debt that arose prior to the effective date
of the plan and substitutes therefor the obligations, if any, specified under
the confirmed plan.
THE DEBTORS BELIEVE THAT THE PLAN COMPLIES WITH ALL REQUIREMENTS OF
THE CODE AND PROVIDES THE BEST AVAILABLE RECOVERY TO THEIR RESPECTIVE ESTATES.
THE PLAN ALSO HAS THE SUPPORT OF THE CREDITORS' COMMITTEE, WHICH WILL RECOMMEND
TO ITS CONSTITUENCY THAT IT VOTE TO ACCEPT THE PLAN. THE DEBTORS URGE ALL
IMPAIRED CREDITORS THAT ARE ENTITLED TO VOTE ON THE PLAN TO ACCEPT THE PLAN.
B. The Debtors
Group is a holding company and the ultimate corporate parent of
approximately 100 domestic (the "U.S. Subsidiaries") and foreign subsidiaries
(the "Foreign Subsidiaries" and, collectively with Group and the U.S.
Subsidiaries, the