Paragon Receives Satisfactory Commitment from Wellspring /Auction Date Extended

Norcross, Georgia (PROTEXT) - Paragon Trade Brands, Inc. (OTCBulletin Board: PGNFQ) today announced that it has received asatisfactory commitment from Wellspring Capital Management LLC("Wellspring") regarding a proposal to acquire Paragon as part ofa plan of reorganization (the "Wellspring Commitment"). Inaddition, Paragon announced that it has filed a stipulation withthe Bankruptcy Court seeking an extension of the deadline forcompeting bids to September 15, 1999 and the auction date toSeptember 21, 1999. The stipulation is supported by Paragon'sOfficial Committee of Unsecured Creditors, and each of TheProcter & Gamble Company, Kimberly-Clark Corporation ("K-C") andthe Official Committee of Security Holders (the "EquityCommittee") representing Paragon's shareholders have indicatedthat it does not oppose the entry by the Bankruptcy Court of thestipulation. The approved auction process and bidding proceduresprovide for the consideration of competing proposals and alsoallow Paragon the option of pursuing a stand-alone plan ofreorganization. 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 a plan of reorganization,subject to dilution and diminution as a result of a rightsoffering for up to 40% of the new common stock (the "RightsOffering"). The Wellspring Commitment also provides forReorganized Paragon's issuance of approximately $160 million of10% senior subordinated notes (the "New Notes") and Wellspringobtaining new third-party working capital financing forReorganized Paragon in the amount of at least $75 million (the"Financing Commitment"). The Wellspring Commitment contemplatesthat on the confirmation date of a plan of reorganizationincorporating the terms of the proposed transaction (the"Wellspring Plan"), there will be approximately $285 million ofenterprise value, excluding certain liabilities of Paragon, theassumption of which by Reorganized Paragon will reduce the amountof distributable value available under the Wellspring Plan tosatisfy prepetition claims to approximately $250 million througha corresponding reduction in the face amount of the New Notes.Alternatively, the Wellspring Commitment provides the option ofissuing only $150 million in New Notes with a coupon based uponprevailing market rates for high yield notes rated "B," resultingin $275 million of enterprise value which, after the reductionsdescribed above, will reduce the amount of distributable valueavailable to satisfy prepetition claims to approximately $240million. Under either alternative, the distributable valuecontemplated in the Wellspring Commitment would be insufficientto satisfy unsecured claims against Paragon in full. However,upon confirmation of a plan of reorganization, all prepetitionclaims against Paragon will be discharged. The Wellspring Commitment is subject to (i) the completion ofa mutually acceptable definitive stock purchase agreement, (ii)the procurement of the Financing Commitment, (iii) Paragon'sfiling of the Wellspring Plan by September 30, 1999, (iv)Bankruptcy Court approval of the Wellspring Plan by November 30,1999 and (v) other conditions precedent standard in a transactionof this nature. The Wellspring Commitment contemplates thatsubstantially all of Paragon's current senior management willcontinue with the Company. The Wellspring Plan provides that Paragon's unsecuredcreditors will receive a pro rata distribution of cash, the NewNotes, 15.9% of the new common stock in Reorganized Paragon,rights to participate in the Rights Offering and proceeds, ifany, of claims assigned to a litigation trust (the "SaleConsideration"). Under the Wellspring Plan current equity will becanceled and shareholders will receive, depending on the finalterms of the Wellspring Plan, that portion, if any, of the SaleConsideration not distributed to Paragon's unsecured creditors. The Wellspring Commitment provides that Paragon maysimultaneously pursue confirmation of a stand-alone plan ofreorganization so that the plan process and Paragon's emergencefrom Chapter 11 are not delayed in the event that the WellspringCommitment is not pursued or consummated, or a higher orotherwise better alternative transaction is not approved oraccepted. Paragon and Wellspring hope and expect that the bidprocedures, combined with active efforts to obtain higher andbetter third-party offers, will lead to prompt negotiations amongprincipal parties in interest and the confirmation of a plansupported by most or all of such parties. Commenting on the Wellspring Commitment, Bobby Abraham, ChiefExecutive Officer of Paragon, stated, "Although Paragon hasalready filed and is working diligently toward confirmation of astand-alone plan, we are delighted to have received asatisfactory commitment from Wellspring. We continue to welcomecompeting bids and look forward to conducting an auction onSeptember 21, 1999. The auction process and bidding procedureshave been designed to result in the highest value for theCompany. By continuing to pursue confirmation of a stand-aloneplan while moving forward with Wellspring and allowing otherpotential bidders to participate in the Bankruptcy Court-approvedauction process, we believe that we will maximize value for ourstakeholders." 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 also reported that the United States District Courtfor the Northern District of Georgia, Atlanta Division, last weekissued an order denying the Equity Committee's motion for a stayof an order of the Bankruptcy Court approving Paragon'ssettlement agreement with K-C and for an expedited appeal of suchapproval. In denying the Equity Committee's request for a stay,the District Court found, among other things, that the EquityCommittee had failed to show that it has a substantial likelihoodof success on its appeal of the K-C settlement. The DistrictCourt also found that the Bankruptcy Court's order approving theK-C settlement was thorough and that the Bankruptcy Court did notabuse its discretion in approving the K-C settlement. TheDistrict Court offered the Equity Committee the option ofconsenting to the District Court's adoption of the BankruptcyCourt's approval order to permit the Equity Committee to take itsappeal of the K-C settlement directly to the Eleventh CircuitCourt of Appeals. In which event, the District Court stated itwould enter a limited stay through October 28, 1999. On September8, 1999, the Equity Committee consented to the procedure proposedby the District Court. 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: Kurt P. Rossor Guy B. Lawrence of K.P. Ross, Inc. Tel.: (USA) 212-308-3333or email: kpross1@msn.com for Paragon Trade Brands, Inc. orAlan J. Cyron Executive Vice President and Chief FinancialOfficer of Paragon Trade Brands, Inc., Tel.: (USA) 678-969-5200

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