Paragon Announces End of Auction Process, Accepts Wellspring Acquisition Commitment / Paragon and its Creditors' Committee Jointly File Plan of Reorganization I

NORCROSS, Ga. (PROTEXT) - Paragon Trade Brands, Inc. (OTCBulletin Board: PGNFQ) today announced that it has accepted acommitment by Wellspring Capital Management LLC ("Wellspring") toacquire Paragon as part of a plan of reorganization (the"Wellspring Commitment") and has filed, along with its OfficialCommittee of Unsecured Creditors (the "Creditors' Committee"), asa co-proponent, an amended plan of reorganization (the "Plan")and disclosure statement (the "Disclosure Statement") in theUnited States Bankruptcy Court for the Northern District ofGeorgia. The Plan filed today by Paragon and the Creditors'Committee incorporates the terms of the Wellspring Commitment.Paragon reported that the filing is the culmination of aBankruptcy Court-approved bidding process that began July 13,1999 and auction process that commenced on September 21, 1999.Paragon, after consultation with the Creditors' Committee, theOfficial Committee of Equity Security Holders (the "EquityCommittee") representing Paragon's shareholders, The Procter &Gamble Company ("P&G") and Kimberly-Clark Corporation ("K-C"),determined that Wellspring had submitted the best bid of thosereceived by the Company. The Plan also contemplates that if, forsome reason, the Wellspring transaction is not consummated, theproponents may pursue confirmation of a stand-alone plan ofreorganization. The Creditors' Committee, as a co- proponent,strongly supports the Plan. The Wellspring Commitment provides for a $100 million equityinvestment in Paragon by Wellspring in return for 84.1% of thenew common stock of the reorganized entity ("ReorganizedParagon") to be issued pursuant to the Plan, subject to dilutionand diminution as a result of a rights offering for up to 19.1%of additional new common stock (the "Rights Offering") andwarrants for up to 5% of the new common stock (the "Warrants").The Wellspring Commitment also provides for Reorganized Paragon'sissuance of approximately $160 million of 10% senior subordinatednotes (the "New Notes") and obtaining new third party workingcapital financing for Reorganized Paragon in the amount of atleast $75 million (the "New Financing"). Alternatively, theWellspring Commitment provides the option of issuing $150 millionin New Notes with a coupon based upon prevailing market rates forhigh yield notes rated "B." Under either alternative, thedistributable value contemplated in the Wellspring Commitmentwould be insufficient to satisfy unsecured claims against Paragonin full. However, upon confirmation of a plan of reorganization,all prepetition claims against Paragon will be discharged. Wellspring's obligation to close the transaction is subject to(i) the completion of a mutually acceptable definitive stockpurchase agreement, (ii) Bankruptcy Court approval of theDisclosure Statement incorporating the Wellspring Commitment byNovember 26, 1999, (iii) confirmation of the Plan by January 15,2000, (iv) all conditions precedent to closing the New Financinghaving been satisfied and (v) other conditions precedent standardin a transaction of this nature. The Plan contemplates thatsubstantially all of Paragon's current senior management willcontinue with the Company. Paragon has filed a motion requestingthe Bankruptcy Court to set a date to consider approval of theDisclosure Statement. Paragon further reported that, in connection with the NewFinancing requirement, Paragon has accepted a commitment fromCiticorp USA, Inc. for a $75 million working capital facility(the "Citicorp Commitment") for Reorganized Paragon. The CiticorpCommitment is also available to Paragon should it pursueconfirmation of a stand-alone plan of reorganization as providedunder the Plan. The Citicorp Commitment is subject to thecompletion of legal due diligence, execution by the parties ofdefinitive documents and approval by the Bankruptcy Court. In the event the Wellspring transaction is consummated,holders of allowed unsecured claims will receive distributions inamounts equal to their pro rata share of (i) cash, (ii) NewNotes, (iii) new common stock of Reorganized Paragon (the "NewCommon Stock"), as may be adjusted by the Rights Offering, (iv)if the current shareholders vote to reject the Plan, theWarrants, and (v) a portion of the proceeds, if any, of alitigation trust to be established under the Plan (the"Litigation Trust"). If the Wellspring transaction is notconsummated and Paragon is reorganized on a stand-alone basis,holders of allowed unsecured claims will receive distributions inamounts equal to their pro rata share of the New Common Stock.Under either scenario, current shareholders (provided they voteto accept the Plan) will receive their pro rata share of theWarrants and their pro rata share of fifty percent of theproceeds, if any, of the Litigation Trust. If currentshareholders vote to reject the Plan, they will not receive anyWarrants and will only be entitled to receive their pro ratashare of that portion, if any, of the proceeds from theLitigation Trust remaining after satisfaction in full of allallowed unsecured claims. Commenting on the Plan and the Wellspring Commitment, BobbyAbraham, Chief Executive Officer of Paragon, stated, "We aredelighted to have concluded our auction process and, as a result,to have finalized our agreement with Wellspring and to have filedour amended plan of reorganization with the Bankruptcy Court. Weare also very pleased to have the support of the Creditors'Committee as a co-proponent of our Plan. These events are majormilestones in our progress toward emergence from Chapter 11. Wenow look forward to moving ahead with completing the transactionwith Wellspring and exiting Chapter 11 as expeditiously aspossible." Wellspring Capital Management LLC manages a private investmentpartnership focused on investing in companies where it can createsubstantial value by contributing management expertise,innovative operating and financial strategies and capital. Thepartnership's capital is provided by investors who are among thelargest and most respected public and private pension funds,corporations and financial institutions in the U.S. and Canada,as well as from the principals of Wellspring. Paragon Trade Brands is the leading manufacturer of storebrand infant disposable diapers in the United States and, throughits wholly owned subsidiary, Paragon Trade Brands (Canada) Inc.,is the leading marketer of store brand infant disposable diapersin Canada. Paragon manufactures a line of premium and economydiapers, training pants, feminine care and adult incontinenceproducts, which are distributed throughout the United States andCanada, primarily through grocery and food stores, massmerchandisers, warehouse clubs, toy stores and drug stores thatmarket the products under their own store brand names. Paragonhas also established international joint ventures in Mexico,Argentina, Brazil and China for the sale of infant disposablediapers and other absorbent personal care products. Statements made in this press release, other than thoseconcerning historical information, should be considered forward-looking statements. Such statements are subject to certain risksand uncertainties that could cause actual results to differmaterially from those expressed in the Company's forward-lookingstatements. Factors which could affect the Company's financialresults, including, but not limited to: the Company's Chapter 11filing; increased raw material prices and product costs; newproduct and packaging introductions by competitors; increasedprice and promotion pressure from competitors; new competitors inthe market; Year 2000 compliance issues; and patent litigation,are described in the Company's Annual Report on Form 10-K filedwith the Securities and Exchange Commission. Readers arecautioned not to place undue reliance on the forward-lookingstatements contained herein, which speak only as of the datehereof, and which are made by management pursuant to the "safeharbor" provisions of the Private Securities Litigation ReformAct of 1995. ots Original Text Service: Paragon Trade Brands,Inc. Internet: http://www.newsaktuell.de Contact: Alan J. Cyron,Executive Vice President and Chief Financial Officer of ParagonTrade Brands, Inc., 678-969-5200, or Kurt P. Ross or Guy B.Lawrence, 212-308-3333, both of K.P. Ross, Inc., or email,kpross1@msn.com , for Paragon Trade Brands, Inc.

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