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W.L. Ross Tries Again: Bankrupt Burlington Accepts $608M Bid

Bankrupt Burlington Industries accepted a $608 million bid by W.L. Ross & Co. Friday, which serves as the base price for today’s court-approved auction.

Ross, chairman of W.L. Ross & Co., said in a statement, “Lees will benefit from Mohawk’s financial strength and business synergies. Burlington’s other operations also will be deleveraged and as privately owned businesses will function even more efficiently and responsively to meet the needs of their customers. Employees will no longer have to worry about the financial viability of their company.”

Bob Lee of Sheffield Merchant Banking Group, financial advisor to the unsecured creditors committee, said in a statement, “The Burlington management team and its advisors ran a very full and effective process. The committee supports the proposed transaction and is pleased that this process indicates an improvement from prior offers.”

Some bankruptcy observers, who knew Ross was keeping close tabs on Burlington, had predicted that his bid would be accepted as the stalking horse to set the baseline for the auction. That’s in part due to his know-how in finding diamonds among distressed firms, as well as his expertise in putting together successful bids.

Ross’s private equity firm 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. During his tenure at Rothschild, he and his small staff were involved as advisors in some of the biggest Chapter 11 newsmakers: Texaco, Continental Airlines, TWA and Revco.

He left two years ago when he founded his own firm. No longer in the advisory business, Ross focuses on buying distressed assets. In the last three years, he has been a major player in the steel industry through his merging of two bankrupt giants, Bethlehem Steel and LTV, into International Steel Group. Ross’ firm paid $325 million for LTV and $1.5 billion for Bethlehem.

He does extensive research in his office, which is filled with a collection of contemporary photographs, many collected from his extensive travels around the world.

The Greensboro, N.C.-based Burlington filed for Chapter 11 bankruptcy court protection on Nov. 15, 2001, in Delaware. For the year ended Sept. 28, Burlington recorded a $100.8 million net loss, which came to $1.89 a diluted share, deeper than the $91.1 million, or $1.73 a share, deficit a year earlier. The loss included $146.5 million in income tax benefits and $165.8 million in pretax restructuring charges. Sales slipped 29.2 percent to $993.3 million.
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