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     Warnaco hit with shareholder suit

NEW YORK, April 20 (Reuters) - One day after a regulatory report showed Warnaco Group Inc.'s (NYSE:WAC - news) auditors have doubts about whether the firm can keep operating, the apparel company was hit Friday with a shareholder suit alleging management concealed Warnaco's true financial condition.

The suit, filed in Manhattan federal court, seeks class action status on behalf of investors who bought stock between Sept. 29, 2000 and April 18, 2001. The defendants include the company and its chief executive Linda Wachner.

The suit alleges the defendants issued false and misleading statements about the company's operations and financial performance and the effect undisclosed conditions would continue to have on the company.

The suit alleges that, during the class period, Warnaco's financial strength was diminished because of an increase in bankruptcies, store closings and product obsolescence. It states that the price of each share fluctuated from $5.97 on Feb. 13 to 65 cents Wednesday. Warnaco shares traded as high as $11 a year ago.

``Nonetheless, defendants embarked on a campaign to conceal the adverse, financial condition of the company and thereby,
avoid a complete collapse in the price of Warnaco shares,'' the suit said.

On Wednesday a filing with the Securities and Exchange Commission showed Warnaco's auditors Deloitte & Touche have
``substantial doubt'' about the apparel company's ability to continue as a going concern.

The auditors also said Warnaco was not in compliance with some covenants of its long-term debt agreements.

The company is currently in discussions with its lenders for permanent amendments to the agreements and if it is not successful, it would have to refinance its debt with others, the filing said. Warnaco's ability to operate as a going concern is dependent on the outcome of the negotiations or on its ability to refinance its debt.

The SEC filing said Warnaco is reviewing its operating structure in an attempt to cut costs. It has also retained financial and legal advisors who are exploring the financial alternatives available to Warnaco, including a possible debt restructuring and
possible sales of assets.

Last week, the company said it received a waiver of certain financial covenants from its lenders through May 16.

Warnaco makes such clothing as Calvin Klein jeans, Warner bras and Speedo swimwear.