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Frostman Files For Protection Under Chapter 11

ForstmannandCo. Inc., New York, recently announced that it has filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code. According to the company, the purpose of commencing a Chapter 11 case was to achieve its long-term objectives which may include a merger, new equity investment or sale of the company.Forstmann also reached an agreement with its bank group, led by Bank of America, to provide a $50 million debtor-in-possession line of financing at the outset. Forstmann believes this amount will be more than sufficient to meet its continued operating needs. The company has retained the New York-based investment banking firm of Butler, ChapmanandCo. Inc. to assist in identifying potential buyers, merger partners and/or investors.Forstmann has also hired Richard Redden of the consulting firm of OSNOS Associates Inc., New York and Charlotte, N.C. He will serve as the companys interim chief operating officer to assist in completing its organization.Rod Peckham, president of Forstmann, said that the company had discussions with several interested parties to merge, acquire or make an equity investment in the business.He said that filing Chapter 11 will allow the company to eliminate significant recurring liabilities, which have served as an impediment to these opportunities and to effect a restructuring and redirection of the company from a product driven commodity-based entity to a market-driven niche supplier of finished goods.The companies that survive in this industry in the future will fall into two categories, Peckham said. (1) Large companies that can compete worldwide through economies of scale, global sourcing and selling opportunities and that are well capitalized to ride the global ups and downs and; (2) niche market suppliers that supply products to serve limited specific market needs through good customer service, innovation, good price-value and that offer the retailer the low inventory, quick response that it requires.When properly reorganized, we are confident that we can successfully compete in those niche markets and produce a reasonable return for our stakeholders.

September 1999