WORCESTER, Mass. - Malden Mills Industries Inc., the Lawrence, Mass., maker of fleece outerwear whose chief executive earned national attention for guiding the company through recovery from a devastating 1995 fire, will emerge from Chapter 11 bankruptcy Aug. 26 under an agreement approved yesterday by a Worcester Bankruptcy Court judge.
The company, which has been in talks with its creditors since December, said its expansion into new markets such as defense and hunting and fishing wear has enabled it to turn a profit.
Under the deal reached yesterday, however, chief executive Aaron Feuerstein must raise $92 million to pay creditors by Aug. 26 or he will lose control of the company that his grandfather founded in 1906.
While Feuerstein remained optimistic that he would be able to raise the sum, lawyers for the company struck a different tone, telling Judge Joel B. Rosenthal that they might need more time to line up the money.
"In short order we'll have all of it raised," Feuerstein said in an interview during yesterday's hearing, which lasted almost 7 1/2 hours.
Noting confidentiality agreements with his new lenders, Feuerstein said he could not disclose yesterday exactly how much money he has raised.
Andrew Schwartz, a lawyer who represents a committee of the company's unsecured creditors, said it was "uncertain" whether Feuerstein would be granted an extension if he requests one.
Malden Mills spokesman David Costello stressed that the company will emerge from Chapter 11 protection Aug. 26 regardless of ownership. "The company has turned around in Chapter 11," he said. "We've grown our sales, and we've increased our earnings."
Richard Jones, a spokesman for General Electric Co.'s commercial finance operation, Malden Mills' largest secured lender, said most of the creditors were satisfied with yesterday's deal. He would not comment on Feuerstein's buyback campaign.
"We're happy that all of the standards of confirmation have been met," he said.
If Feuerstein is unable to raise the money, control of the company will revert to a board of seven directors, on which Feuerstein would have one vote. Two seats would be controlled by the company's senior lenders, including GE; two would go to a group of unsecured creditors; and the remaining two would be filled by independent directors.
Feuerstein said he feared for the job security of his employees if he was unable to exercise his purchase option.
"I'm happy that the initial step has been taken," he said, referring to yesterday's agreement. "But the real test - the only real way to protect our workers in Lawrence, Methuen [Mass.], and New Hampshire - is to see what happens on the 26th."
Malden Mills amassed more than $180 million in debt after the fire in December 1995, when Feuerstein, now 77, refused to lay off workers even though it cost him millions of dollars to rebuild the company's manufacturing facilities.
Creditors steered the company into Chapter 11 protection in November 2001 after sales of its signature Polartec fleece fabrics plummeted.
But, Costello said, new contracts with the U.S. military have helped to vault Malden Mills into the black again. Defense officials are especially interested in Malden Mills' "electronic textiles," which use embedded conductive fibers to monitor soldiers' vital signs or transmit the location of a bullet wound, he said.
The company has also developed electronic fabric garments that radiate heat and act as antennas.
Feuerstein will earn an annual salary of $425,000 as chief executive. For five years after he retires, Feuerstein will make $250,000 as a consultant.