Laid-off workers may owe doctors

ASSOCIATED PRESS

Thousands of Pillowtex workers who lost their jobs last month may owe $5 million to $6 million to doctors, hospitals and other health care providers for medical services they received before the company shut down.

More than 5,000 Pillowtex employees lost their jobs and their health coverage July 30, when the textile giant closed five North Carolina plants in the largest layoff in state history. They may be liable for outstanding medical bills that Pillowtex didn’t pay before declaring bankruptcy.

“It’s very surprising and disturbing, too,” said Diane Russell, 57, who worked at Plant One in Kannapolis, N.C., before losing her job last month.

Mrs. Russell, a diabetic with high blood pressure, wonders whether she may be billed soon for doctor visits or prescriptions that hadn’t been paid when Pillowtex folded.

“I have been working there for 30 years,” Mrs. Russell said. “They were taking out of our checks, you know, to pay those bills.”

Meanwhile, an Indian towel manufacturer emerged Friday as a rival to the liquidation company that is hoping to buy Pillowtex Corp.’s assets.

In a filing with the U.S. Bankruptcy Court in Delaware, Welspun India Ltd. said it is interested in buying substantially all of Pillowtex’s assets and “exploring the possibility of continuing operations” at particular Pillowtex plants.

The filing by Welspun India is a potential roadblock to plans by GGST LLC to buy the company. A day before Pillowtex filed for Chapter 11 bankruptcy protection last month, GGST signed an agreement to buy Pillowtex’s plants, machinery, brands and other assets for about $56 million and sell them off, according to court filings.

The company that buys Pillowtex’s assets will help determine whether any of its plants reopen and what will become of Pillowtex’s well-known brand names such as Cannon and Royal Velvet.

Pillowtex’s workers’ union and North Carolina Gov. Michael F. Easley, a Democrat, are also working to identify companies that could buy and reopen plants.

Industry analysts have said that Pillowtex’s Fieldale, Va., plant, which made high-end towels, stands the best chance to reopen, along with plants in its pillow and pad division. That division has plants in Chicago, Dallas, Los Angeles, Hanover, Pa., and Tunica, Miss.

Pillowtex, based in Kannapolis, was until recently one of the nation’s largest home-furnishings manufacturers, selling products such as towels, sheets, blankets, bath rugs, comforters and mattress pads to retailers.

Last month, Pillowtex closed all 16 of its plants nationwide and eliminated most of its 7,650 jobs. About 850 workers are still winding down the company, one of the biggest liquidations in the industry.

Mr. Easley sent a letter to Pillowtex Chairman Michael T. Gannaway and the company’s largest creditors urging them to devise a plan to pay the health care bills.

“At the time these bills were incurred, Pillowtex employees were continuing to pay their health insurance premiums, and all parties understood that insurance was in force and that claims would be paid,” Mr. Easley wrote in his letter, which is now part of the company’s bankruptcy file.

“This situation is grossly unfair to these employees and has the potential to wreak further havoc on their families and communities.”

In a letter responding to the governor, Mr. Gannaway wrote that the company hoped to pay the medical bills.

“The company shares your concern for the welfare of its current and former employees and is well aware of the hardship imposed on employees by any failure by the company to honor pre-petition obligations,” Mr. Gannaway wrote in the Aug. 13 letter.

The issue never would have arisen if Pillowtex had turned to a private insurer for health care coverage. Although Blue Cross and Blue Shield of North Carolina administered the company’s claims, Pillowtex was self-insured, meaning it paid its own medical bills from its own fund and with worker premiums.