Exide wins final approval of $500 million DIP loan over environmental objections

By Matt Chiappardi

Law360, Wilmington (July 24, 2013, 8:52 PM ET) — A Delaware bankruptcy judge granted final approval Wednesday to battery manufacturing giant Exide Technologies’ $500 million post-petition loan over objections from environmental regulators who were worried the terms could prevent the company from responding to emergencies.

U.S. Bankruptcy Judge Kevin J. Carey ruled that the debtor-in-possession loan terms had enough flexibility to allow Exide to respond in the case of an environmental disaster, and that nothing had been presented at a hearing on the matter to suggest it would act irresponsibly.

“The record doesn’t show any threat to public health or safety,” the judge said. “The debtor has appropriately exercised its business judgment, and I’m prepared to grant the relief.”

Judge Carey had also presided over Exide’s prior Chapter 11 case a decade ago and said the company had acted responsibly in terms of its environmental obligations then.

“I expect the company will act the same with regard to this Chapter 11,” the judge said from the bench.

But if a problem were to arise, Judge Carey invited the regulators to return to the court.

“I promise I will make myself available and respond accordingly,” Judge Carey said.

The loan terms had drawn flak from the U.S. Environmental Protection Agency, as well as environmental regulators from 10 states, which argued that Exide would be bound to the credit facility’s budget, leaving it with no wiggle room to respond to an emergency quickly and potentially sticking the government with the bill.

Environmental agencies from California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Kansas, Mississippi and Missouri each joined the objection, which the U.S. Department of Justice lodged on the EPA’s behalf, according to court records.

In court Wednesday, Exide attorney Kenneth S. Ziman of Skadden Arps Slate Meagher & Flom LLP argued that the credit facility’s terms and budget had plenty of room and flexibility to respond to matters both in the ordinary course of business and in emergencies.

But DOJ attorney Alan S. Tenenbaum countered that there were “limits to the flexibility.”

The feds were not looking to challenge the amount of the loan or Exide’s right to borrow, but wanted to ensure that the company’s ability to respond to disasters was not restricted by its budget, Tenenbaum argued.

The DIP facility comes from JPMorgan Chase Bank NA and is split into a $275 million term loan and a $225 million revolving credit facility, according to court records.

When Judge Carey granted interim approvalof the loan June 11, Exide able to tap only $170 million from the term loan, but had full access to the revolving credit line.

Exide’s president and CEO released a statement Wednesday afternoon, lauding the loan’s approval.

“We are very pleased to have arranged financing that is sufficient to enable us to continue operations uninterrupted while we proceed with our restructuring,” said James R. Bolch. “We are grateful for the support of our lenders and the confidence they have displayed in Exide by meeting our funding needs.”

Georgia-based Exide, one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection June 10, citing rising production costs, intense competition and reduced access to credit.

The company’s non-U.S. operations were not included in the filing and continue to operate without the court’s supervision, according to Exide.

After a previous Chapter 11 filing in 2002, Exide emerged in 2004, having won approval of a plan that eliminated $1.3 billion in debt. But litigation in the case dragged on for years afterward.

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 Pete Brush, Jamie Santo and Evan Weinberger. Editing by Kat Laskowski.