BREAKING NEWS: TCEQ files objection to Exide request to keep spending proceeds from debtor-in-possession loan; wants judge to ensure funds secured for environmental cleanup obligations Exide owes Texas
FROM LAW360 (subscription required)
Exide Bankruptcy Loan Shirks Enviro Liability, Texas Says
Law360, Houston (July 03, 2013, 8:08 PM ET) — Texas regulators urged a Delaware bankruptcy judge to prevent troubled battery maker Exide Technologies Inc. from continuing to spend proceeds from a $500 million postpetition loan until funds are secured for environmental cleanup obligations owed to the state.
The Texas Commission on Environmental Quality filed an objection on July 2 to Exide’s request to spend proceeds of the loan, arguing that because it is secured against the majority of the company’s assets there is no guarantee Exide will be able to live up to its agreement with the state to clean up a decommissioned battery recycling facility and other properties.
“TCEQ objects to the broad security interest the debtor seeks to provide 
to the [debtor-in-possession] lenders and respectfully requests that any financial assurance of the debtor provided to the government, any insurance proceeds or insurance coverage for liabilities to the government and any right of setoff of any governmental unit be carved out from the grant of the security interest,†the objection said.
Representatives for Exide did not immediately respond to a request for comment Wednesday.
The TCEQ says Exide is in the process of demolishing and decontaminating a battery recycling facility located in the Dallas suburb of Frisco, Texas, which was active from 1964 to 2012 as a secondary lead smelter. In addition to tearing down the plant, Exide is cleaning up a landfill and wastewater system used to treat slag that resulted from the recycling process, according to TCEQ.
And Exide has agreed to sell about 170 acres of surrounding buffer property it owns to the Frisco Economic Development Corporation and the Frisco Community Development Corporation, but must first clean up the property to risk-based residential standards under TCEQ’s Voluntary Cleanup Program, TCEQ says.
Although Exide has said it intends to continue to remediate the property and will make good on its agreements with the state, the TCEQ says the terms of its bankruptcy loan should be modified because they give Exide’s lenders priority over the company’s environmental obligations.
“TCEQ respectfully contends that the court should not be asked to preordain the entire case at the outset because of the debtor’s contractual agreements with its lenders,†the objection said.
TCEQ’s objection comes about a month after U.S. Bankruptcy Judge Kevin J. Carey gave the nod (see related story below) to Exide’s request for debtor-in-possession financing from JPMorgan Chase Bank NA, which is split into a $275 million term loan and a $225 million revolving credit facility.
During that hearing, the Texas attorney general’s office unsuccessfully sought to postpone final approval of the loan, scheduled for July 11, so it could scour the 700-page request for any objectionable terms.
Though Judge Carey refused to delay the hearing, he said he would consider any objections raised by the state before giving final approval.
Georgia-based Exide, which is one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection on June 10 citing in its petition a triple whammy of rising production costs, intense competition and reduced access to credit.
The company, which has operations across the U.S. and Europe, suffered what it called a “significant setback†when on April 24 a California regulatory agency ordered Exide to stop operations at a battery recycling facility in Vernon, Calif., according to court records.
Although a California judge temporarily overturned the shutdown on July 2, Exide said the stoppage could cost it millions in projected earnings as the legal challenge over the plant moves forward.
Another blow came when Wal-Mart Stores Inc. decided to name chief competitor Johnson Controls Inc. as its sole supplier of transportation batteries, wiping out $160 million in annual revenue, and costing the company a main source of battery cores, which it recycles by melting them down to extract lead for new batteries, according to court records.
When Exide filed, it listed $1.89 billion in assets against $1.14 billion in debts as of March 31, including $675 million in secured notes, $160 million owed under a secured credit facility, $103.5 million in general unsecured debt and $51.9 million in unsecured convertible notes, according to court records.
Exide is represented by Kenneth S. Ziman, J. Eric Ivester, Sarah M. Ward, Peter Atkins, Anthony W. Clark, Christine W. Kim and James J. Mazza Jr. of Skadden Arps Slate Meagher & Flom LLP.
The case is In re: Exide Technologies, case number 1:13-bk-11482, in the U.S. Bankruptcy Court for the District of Delaware.
–Additional reporting by Matt Chiappardi and Jamie Santo. Editing by Stephen Berg.
Exide Gets A Boost From Approval Of $500M Bankruptcy Loan
Law360, Wilmington (June 11, 2013, 4:24 PM ET) – Exide Technologies got a jolt of cash Tuesday when a Delaware bankruptcy judge gave the nod to a $500 million post-petition loan aimed at helping the battery manufacturing giant recharge through the Chapter 11 process.
U.S. Bankruptcy Judge Kevin J. Carey approved the debtor-in-possession financing from JPMorgan Chase Bank NA, which is split into a $275 million term loan and a $225 million revolving credit facility, giving Exide interim access to $170 million from the term loan and full access to the credit line on an interim basis.
“Based on the record presented, I am prepared to grant your request for financing,†Judge Carey said In court. “I will sign those orders.â€
Exide’s loan request sailed through, despite several notes from the U.S. Trustee’s Office that attorneys for Exide and JPMorgan ironed out before the financing was up for a hearing.
They included several small changes described as language clarifications, as well as an assurance added into the order that parties would not be restricted from challenging the financing terms during the so-called challenge period.
But a change that did not go through was a request from the Texas Attorney General’s Office to postpone the final hearing, scheduled for July 11, by 15 to 30 days.
Hal F. Morris, representing the Texas Attorney General’s Office by telephone, said that his agency didn’t have any specific objections at the moment, but wanted more time for his and other government regulatory authorities to look over the nearly 700 pages of the loan request to be certain.
Exide’s attorney Kenneth S. Ziman of Skadden Arps Slate Meagher & Flom LLP said in court that there was nothing in the loan terms that “negatively impacts†Morris, and Judge Carey did not grant any extension.
“I do understand the volume of the paperwork, believe me,†Judge Carey said in court. “You’ll have another bite at this apple. If you still have any problems then you can raise them at the final hearing.â€
Georgia-based Exide, which is one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection Monday citing in its petition a triple whammy of rising production costs, intense competition and reduced access to credit.
The company, which has operations across the U.S. and Europe, suffered what it called a “significant setback†when on April 24, a California regulatory agency ordered Exide to stop operations at a battery recycling facility in Vernon, Calif., according to court records.
Although the company is challenging the shutdown, Exide expects the stoppage to cost it $24 million in projected earnings over the next six months, according to the filing.
Another blow came when Wal-Mart Stores Inc. decided to name chief competitor Johnson Controls Inc. as its sole supplier of transportation batteries, wiping out $160 million in annual revenue, and costing the company a main source of battery cores, which it recycles by melting them down to extract lead for new batteries, according to court records.
When Exide filed, it listed $1.89 billion in assets against $1.14 billion in debts as of March 31, including $675 million in secured notes, $160 million owed under a secured credit facility, $103.5 million in general unsecured debt, and $51.9 million in unsecured convertible notes, according to court records.
On Tuesday, Judge Carey also gave the OK for several typical first-day motions including the ability to pay utilities and employees and manage its own cash.
The cash management system will remain the same as it was before the filing, and Exide will be able to pay its 3,600 employees, 2,500 of whom are paid hourly and 1,100 of whom are salaried, Exide attorneys said in court.
Out of that workforce, 540 employees are unionized and 16 are located in Canada.
Exide is represented by Kenneth S. Ziman, J. Eric Ivester, Sarah M. Ward, Peter Atkins, Anthony W. Clark, Christine W. Kim and James J. Mazza Jr. of Skadden Arps Slate Meagher & Flom LLP.
The case is In re: Exide Technologies, case number 1:13-bk-11482, in the U.S. Bankruptcy Court for the District of Delaware.
–Additional reporting by Jamie Santo. Editing by John Quinn.
