Following emergence from Chapter 11, Burlington would operate as a wholly owned subsidiary of Berkshire Hathaway. Burlington and Berkshire currently expect the closing to occur toward the end of the June quarter of 2003.
The details of the transaction are set forth in papers being filed with the Court and with the Securities and Exchange Commission. Under the proposed plan, Burlington's secured creditors would be paid in full and its pre-petition unsecured creditors would receive cash and certain other assets estimated to be 34 to 35 percent of their claims. All shares of Burlington's Common Stock would be canceled with no payment. Burlington would emerge with no debt, other than ordinary course liabilities and certain pre-petition obligations, having repaid the majority of the $1.1 billion of liabilities it had prior to its bankruptcy filing, and eliminating the balance through the bankruptcy process.
"This is a very positive outcome for the company, our employees and our creditors," said George W. Henderson, III, Chairman and CEO of Burlington. "Over the last year our efforts have increased the value of our company and allowed us to achieve a significant level of return for our creditors despite extraordinarily challenging conditions in our industry and the capital markets.
"In several recent cases, other companies have emerged from bankruptcy with excessive debt only to be faced with renewed problems. The opportunity to be totally debt free and having made considerable progress in our globalization efforts puts us in a unique position to take full advantage of our capabilities and compete successfully in a rapidly changing textile business."
Warren E. Buffett, Chairman of Berkshire Hathaway commented further, "Only the very strong will survive in the textile industry -- strong in management, strong in worker skills and strong in financial strength. Burlington brings the first two resources to a successful reorganization; Berkshire brings the latter. Burlington will go forth as a company with no debt, talented and dedicated management, and a workforce second to none. It will be a company designed for success."
Burlington will seek Court approval of procedures whereby higher and better offers to purchase Burlington may be considered and authorizing the payment to Berkshire of a termination fee in certain circumstances. Burlington pointed out that the Berkshire offer is for cash and is not dependent on obtaining outside financing. The closing of the transaction is subject to various conditions, including the completion of the alternative offer process and pre-merger notification requirements of U.S. law.
In reaching its decision to enter into the Berkshire Agreement, Burlington's Board considered a number of alternatives, including a proposal from WL Ross & Co LLC for a stand-alone reorganization. This proposal was contingent upon obtaining new debt, and would pay only secured claims in cash and then offer the unsecured creditors new common stock. Such proposal may be considered again by the Company in connection with its ultimate determination of the best and highest offer for the Company under the bidding procedures to be established by the Bankruptcy Court.