IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION,

et al.1 Debtors. ) ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification #13-3489233) Honorable Steven W. Rhodes

DEBTORS OMNIBUS STATUS REPORT AND REPLY REGARDING OBJECTIONS TO THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE DEBTORS CARPET & ACOUSTICS BUSINESS The above-captioned debtors (collectively, the Debtors) respectfully submit this omnibus status report and reply (this Reply) regarding the objections to that portion of the Debtors Motion for the Entry of Orders Approving Bidding Procedures, Sale of Substantially All of the Assets of the Debtors Carpet & Acoustics Business Free and Clear of Liens, Claims, Encumbrances and Interests and Related Relief [Docket No. 4538] (the Motion) that seeks the entry of an order approving the sale (the Sale) of substantially all of the assets of the Debtors

The Debtors in the jointly administered cases include: Collins & Aikman Corporation; Amco Convertible Fabrics, Inc., Case No. 05-55949; Becker Group, LLC (d/b/a/ Collins & Aikman Premier Mold), Case No. 05-55977; Brut Plastics, Inc., Case No. 05-55957; Collins & Aikman (Gibraltar) Limited, Case No. 05-55989; Collins & Aikman Accessory Mats, Inc. (f/k/a the Akro Corporation), Case No. 05-55952; Collins & Aikman Asset Services, Inc., Case No. 05-55959; Collins & Aikman Automotive (Argentina), Inc. (f/k/a Textron Automotive (Argentina), Inc.), Case No. 05-55965; Collins & Aikman Automotive (Asia), Inc. (f/k/a Textron Automotive (Asia), Inc.), Case No. 05-55991; Collins & Aikman Automotive Exteriors, Inc. (f/k/a Textron Automotive Exteriors, Inc.), Case No. 05-55958; Collins & Aikman Automotive Interiors, Inc. (f/k/a Textron Automotive Interiors, Inc.), Case No. 05-55956; Collins & Aikman Automotive International, Inc., Case No. 05-55980; Collins & Aikman Automotive International Services, Inc. (f/k/a Textron Automotive International Services, Inc.), Case No. 05-55985; Collins & Aikman Automotive Mats, LLC, Case No. 05-55969; Collins & Aikman Automotive Overseas Investment, Inc. (f/k/a Textron Automotive Overseas Investment, Inc.), Case No. 05-55978; Collins & Aikman Automotive Services, LLC, Case No. 05-55981; Collins & Aikman Canada Domestic Holding Company, Case No. 05-55930; Collins & Aikman Carpet & Acoustics (MI), Inc., Case No. 05-55982; Collins & Aikman Carpet & Acoustics (TN), Inc., Case No. 05-55984; Collins & Aikman Development Company, Case No. 05-55943; Collins & Aikman Europe, Inc., Case No. 05-55971; Collins & Aikman Fabrics, Inc. (d/b/a Joan Automotive Industries, Inc.), Case No. 05-55963; Collins & Aikman Intellimold, Inc. (d/b/a M&C Advanced Processes, Inc.), Case No. 05-55976; Collins & Aikman Interiors, Inc., Case No. 05-55970; Collins & Aikman International Corporation, Case No. 05-55951; Collins & Aikman Plastics, Inc., Case No. 05-55960; Collins & Aikman Products Co., Case No. 05-55932; Collins & Aikman Properties, Inc., Case No. 05-55964; Comet Acoustics, Inc., Case No. 05-55972; CW Management Corporation, Case No. 05-55979; Dura Convertible Systems, Inc., Case No. 05-55942; Gamble Development Company, Case No. 05-55974; JPS Automotive, Inc. (d/b/a PACJ, Inc.), Case No. 05-55935; New Baltimore Holdings, LLC, Case No. 05-55992; Owosso Thermal Forming, LLC, Case No. 05-55946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 05-55962; and Wickes Manufacturing Company, Case No. 05-55968.

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Carpet & Acoustics business (the Carpet & Acoustics Business) and related relief (the Sale Approval Relief). In support of this Reply, the Debtors respectfully state as follows: Introduction Since filing the Motion and noticing more than 100,000 parties of the Motion, the Debtors have worked diligently with their major constituents and objecting parties to resolve consensually all ten of the objections to the Sale. The Debtors have resolved seven objections at the time of filing this Reply, and the Debtors are attempting to resolve each remaining objection. If any of these objections are not resolved before the hearing on the Sale Approval Relief (the Sale Hearing), the Debtors intend to present facts and argument sufficient to persuade the Court to overrule such objections. The Debtors believe that they will have sufficiently addressed each of the objections by the Sale Hearing (to the extent necessary) and, furthermore, have obtained support for the Sale from their major constituents. Therefore, the Debtors respectfully request that the Court grant the Sale Approval Relief. Background 1. On April 20, 2007, after extensive negotiations with the stalking horse purchaser

of the Carpet & Acoustics Business, the Debtors filed the Motion, which, among other things, requests the Sale Approval Relief. The Debtors provided notice of the Motion to more than 100,000 parties in these chapter 11 cases. 2. On May 1, 2007, the Court entered the Order (A) Approving Bidding Procedures,

Bid Protections and Overbid Protections in Connection with the Sale of Substantially All of the Assets of Debtors Carpet & Acoustics Business, (B) Approving the Form and Manner of Notice, (C) Scheduling an Auction and Sale Hearing and (D) Approving Procedures for Determining Cure Amounts [Docket No. 4594].

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3.

The Debtors received objections from ten parties to the Sale Approval Relief

(collectively, the Objections). Resolved Objections 4. In an effort to consensually resolve the Objections, the Debtors engaged in

discussions with each of the objecting parties that filed an Objection. The Debtors are pleased to report that they have been able effectively to resolve seven of the Objections (collectively, the Resolved Objections) to the satisfaction of the Debtors and each relevant objecting party. Resolved Objection of the Inmet Division of Multimatic (Multimatic) 5. On May 4, 2007, Multimatic filed its objection toSale Approval Relief

[Docket No. 4613] under which Multimatic asserts that the pleadings related to the Sale impair its right of recourse to certain of the Canadian assets of the Carpet & Acoustics Business. After engaging in negotiations with Multimatic, the Debtors and counsel for Multimatic have agreed, subject to final approval by Multimatic, to include the following in the Sale Order: Nothing in this Order, the Sale Motion, the Purchase Agreement or any of the Ancillary Agreements shall affect the rights, if any, of the Inmet Division of Multimatic (Multimatic) to pursue any recourse it may have with respect to the Purchased Assets that are owned by Collins & Aikman Holdings Canada Inc. or Collins & Aikman Canada Inc., which are subject to proceedings under the Companies Creditors Arrangement Act; all such rights of Multimatic and all defenses and claims of all parties with respect thereto are hereby reserved. Resolved Objection of Maryland Electric Co., Inc. (Maryland Electric) 6. On May 10, 2007, Maryland Electric filed its objection to the Sale Approval

Relief [Docket No. 5318] in which it asserts that the Debtors fail to articulate a process to allocate the purchase price to satisfy the allowed lien of Maryland Electric on certain assets of the Carpet & Acoustics Business. After engaging in negotiations with and upon the agreement

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of Maryland Electric, the order approving the Sale Approval Relief (the Sale Order) will include the following: The Debtors shall pay $95,282.87 from the proceeds received from the Sale to Maryland Electric Co., Inc. so as to satisfy the secured claim filed by Maryland Electric Co., Inc. in these chapter 11 cases (Claim No. 3911) (the Maryland Electric Claim). Such payment on account of the Maryland Electric Claim shall fully, finally and completely resolve any claims filed by Maryland Electric Co., Inc. in these chapter 11 cases. Resolved Objections of Certain Insurers 7. Prior to the deadline to file objections to the Sale Approval Relief,

(a) Mt. McKinley Insurance Company (formerly known as Gibraltar Casualty Company) and Everest Reinsurance Company (formerly known as Prudential Reinsurance Company), (b) Firemans Fund Insurance Company, National Surety Company and (c) members of the ACE Group of Companies, including without limitation ACE American Insurance Company, Westchester Fire Insurance Company and ACE International Reinsurance Company, Ltd. (collectively, the Insurers) each filed an objection under which each asserts that the Debtors intent to assign certain of the Insurers insurance policies in connection with the Sale is ambiguous. After engaging in negotiations with and upon the agreement of each of the Insurers, the Sale Order will include the following: Notwithstanding anything to the contrary in the Purchase Agreement or this Order, the insurance agreements between the Sellers and (a) Mt. McKinley Insurance Company (formerly known as Gibraltar Casualty Company) and Everest Reinsurance Company (formerly known as Prudential Reinsurance Company), (b) Firemans Fund Insurance Company, National Surety Company and (c) members of the ACE Group of Companies, including without limitation ACE American Insurance Company, Westchester Fire Insurance Company and ACE International Reinsurance Company, Ltd. shall not be assumed and assigned to the Purchaser under the Purchase Agreement, and no right in or under such insurance agreements shall be transferred to the Purchaser. 4
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Resolved Objection of the Village of Rantoul, Illinois (the Village of Rantoul) 8. On May 18, 2007, the Village of Rantoul filed its objection to the Sale Approval

Relief [Docket No. 7271] seeking clarification as to whether the Debtors intend to assume and assign their lease with the Village of Rantoul in connection with the Sale. After engaging in negotiations with and upon the agreement of the Village of Rantoul, the Sale Order will include the following: The contracts or leases with the Village of Rantoul listed on the Contract and Cure Schedule were listed in error and the contracts or leases with the Village of Rantoul are not implicated by and are not being assumed in connection with the Sale. Resolved Objection of Rieter Automotive North America (Rieter) 9. On May 18, 2007, Rieter filed its objection to the Sale Approval Relief

[Docket No. 7272] seeking clarification as to which, if any, of Rieters executory contracts the Debtors intend to assume and assign in connection with the Sale. After entering into discussions with the Debtors and conducting an internal review, Rieter filed a notice withdrawing its objection to the Sale [Docket No. 7380]. Outstanding Objections 10. Despite the Debtors best efforts to resolve all of the Objections prior to the filing

of this Reply, the Debtors have yet to fully resolve three of the Objections (collectively, the Outstanding Objections). The Debtors will continue to work to resolve each of the

Outstanding Objections prior to the Sale Hearing. Outstanding Objection of General Electric Capital Corporation (GECC) 11. On May 18, 2007, GECC filed its limited objection to the Sale Approval Relief

[Docket No. 7264] and on June 1, 2007, GECC filed an objection to the amendment to the asset purchase agreement for the Carpet & Acoustics Business that was filed with the Court on

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May 26, 2007 [Docket No. 7377]. Pursuant to such objections, GECC requested additional information with respect to (a) any assets financed by GECC that are included in the Sale and (b) any of GECCs executory contracts that the Debtors may attempt to assume and assign in connection with the Sale and cure amounts related thereto. 12. The Debtors continue to negotiate with GECC to resolve the objections. The

Debtors believe that through their ongoing discussions with GECC, such objections will ultimately be resolved prior to the Sale Hearing. 13. To the extent GECCs objections are not resolved prior to the Sale Hearing, the

Debtors believe that sufficient justification exists to overrule such objections. Indeed, as the Debtors have indicated to GECC, the Debtors will not assume or assign any of GECCs assets in connection with the Sale. Moreover, the Debtors will amend the order approving the sale to sufficiently protect GECCs rights with respect to any of its assets affected by the Sale. As such, if the Debtors are unable to resolve GECCs objections consensually, the Debtors respectfully request that the Court overrule such objections. Outstanding Objection of Anchor Court, LLC (Anchor Court) 14. On May 18, 2007, Anchor Court filed its objection to the Sale Approval Relief

[Docket No. 7266] pursuant to which Anchor Court: (a) sought clarification as to (i) whether its lease with the Debtors would be assumed and assigned in connection with the Sale and (ii) the cure amount associated with any proposed assumption of such lease; and (b) to the extent its lease with the Debtors would be assumed in connection with the Sale, requested that the proposed purchaser of the Carpet & Acoustics Business provide Anchor Court with adequate assurance of future performance.

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15.

On June 1, 2007, Anchor Court identified specific alleged defaults that the

Debtors would have to cure as part of any assumption of its lease in its supplemental objection [Docket No. 7376]. 16. The Debtors have notified Anchor Court that they intend to assume and assign

Anchor Courts lease as part of the Sale. Further, pursuant to section 365(b)(1)(A) of the Bankruptcy Code, the Debtors are required to cure or provide adequate assurance of prompt cure of any defaults under Anchor Courts lease. See 11 U.S.C. 365(b)(1)(A). The Debtors have engaged in discussions with Anchor Court regarding the requested repairs and, subject to receiving an estimate of the costs associated with such repairs, the Debtors will pay Anchor Court for such repairs as part of the cure amount. If the Debtors and Anchor Court cannot agree on the cure amount prior to the Sale Hearing, the Debtors request that the Court approve the assumption and assignment and hear the cure dispute at the June 21, 2007 hearing. The Debtors respectfully submit that adjudicating the cure amount in less than three weeks satisfies the standard set forth in section 365(b)(1)(A) of the Bankruptcy Code. 17. Additionally, Anchor Court has entered into a confidentiality agreement with

International Automotive Components Group North America, Inc., which will allow Anchor Court to receive certain financial information, and which information the Debtors believe will provide Anchor Court with adequate assurance of future performance by the assignee of the lease. The Debtors believe that by (a) providing such financial information and (b) indicating their willingness to pay for the requested repairs of the leased property, the Debtors have sufficiently addressed Anchor Courts objections. Therefore, the Debtors

respectfully request that the Sale Order provide for the assumption and assignment of the Anchor Court lease subject to agreement or Court resolution of the cure amount issue.

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Outstanding Objection of The Dow Chemical Company and Its Subsidiaries and Affiliates (collectively, Dow) 18. On May 31, 2007, Dow filed its objection to the Sale Approval Relief

[Docket No. 7370] in which it asserts that the Debtors (a) did not provide Dow with sufficient notice of the Motion and the amendment to the asset purchase agreement for the Carpet & Acoustics Business and (b) improperly seek to assume postpetition agreements with Dow. 19. Initially, as set forth in the certificates of service filed in connection with the

Motion and the amendment to the Carpet & Acoustics Business asset purchase agreement, the Debtors did provide notice to Dow and its counsel of such pleadings. See Certificate of Service of Motion [Docket No. 4538]; Certificate of Service of Notice of Amendment to Purchase Agreement for Substantially All of the Assets of the Debtors Carpet & Acoustics Business and Extension of Bid Deadline of May 31, 2007 [Docket No. 7357]. 20. Moreover, the Debtors (a) do not maintain any prepetition contracts with Dow

that relate to the Carpet & Acoustics Business and (b) only maintain one postpetition contract with Dow in connection with the Carpet & Acoustics Business. The Debtors have informed Dow and its counsel that no contracts with Dow will be assumed and/or assigned in connection with the Sale. Therefore, if Dows objection is not resolved before the Sale Hearing, the Debtors respectfully request that the Court overrule such objection. Conclusion As set forth herein, the Debtors believe that they have adequately addressed the Objections. Additionally, the Debtors believe further that they will resolve the before the Sale Hearing. Finally, to the extent the

Outstanding Objections

Outstanding Objections are not resolved, the Debtors respectfully assert that such objections 8
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should be overruled for the reasons set forth herein and, if applicable, as will be set forth on the record at the Sale Hearing. Accordingly, the Debtors respectfully request that the Court grant the Sale Approval Relief and such other and further relief as is just and proper. Dated: June 4, 2007 KIRKLAND & ELLIS LLP /s/ Ray C. Schrock Richard M. Cieri (NY RC 6062) Citigroup Center 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 -andDavid L. Eaton (IL 3122303) Ray C. Schrock (IL 6257005) Marc J. Carmel (IL 6272032) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 -andCARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) 4111 West Andover Road West - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

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