Burlington’s Bonanza: $579M Buffett Offer Ignites Bidding Battle

Burlington Industries said Tuesday that it has agreed to be acquired by Berkshire Hathaway, but bankruptcy investor king Wilbur Ross says “not so...

The court auction could get interesting. Berkshire’s bid provides a baseline for valuating the Burlington operation but, with Berkshire as the stalking horse, other firms might want to see what the Buffett-amplified fuss is all about.

And a fuss over who wins Burlington is pretty much guaranteed: Wilbur Ross told WWD Tuesday that he will make a second play for Burlington.

"We believe that our bid is considerably superior to the bid put forward by Berkshire Hathaway, and therefore, if the company does try to seek approval based on the current play, we intend to rigorously oppose it," the financier said.

Ross’s private equity firm WL Ross & Co. manages funds that are owed $81 million of Burlington unsecured bonds and accrued interest of $1.4 million, as well as $7 million of Burlington bank debt.

Ross built his reputation during his 24-year stint at Rothschild Inc., where he demonstrated a shrewd eye for value among firms headed toward the graveyard. He left two years ago, founded his own firm and is now also chairman of Burlington’s unsecured creditors’ committee.

Earlier in the day, before the Berkshire deal was announced, Ross proposed financing that would have enabled Burlington to emerge in a stand-alone plan of reorganization. The plan called for Burlington’s $28 million of administrative claims and $439 million in secured debt to be paid in full from cash on hand, plus $250 million of new debt.

In addition, Ross’s plan provides that $300 million of bonds and other unsecured claims would be exchanged for 57 percent of the stock of the reorganized company. Bond holders would be issued transferable rights to subscribe for 43 percent of the stock for $85 million. Unsecured creditors would receive proceeds from the sale of nonoperating assets valued at between $20 million and $25 million. Ross would become the majority shareholder.

Buffett and representatives at Berkshire declined comment. George Henderson 3rd, chairman and chief executive officer of Burlington, could not be reached for comment, but a statement issued by Burlington and Berkshire noted that the Berkshire offer would leave Burlington debt-free, other than customary liabilities and certain pre-petition obligations. The bulk of its $1.1 billion of liabilities prior to its filing will be repaid, with the balance eliminated through the bankruptcy process.
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