EXIDE BANKRUPTCY BREAKING NEWS: Exide asks bankruptcy court to approve $65 million in additional debtor-in-possesion financing to bridge way through negotiations on Plan of Reorganization submitted by unofficial committee of secured creditors
Exide Seeks $65M In Additional Bankruptcy Financing
Law360, Wilmington (July 07, 2014, 7:05 PM ET) — Battery maker Exide Technologies Inc. asked the Delaware bankruptcy court to approve $65 million in additional debtor-in-possession financing to bridge its way through negotiations on a Chapter 11 plan connected to a reorganization proposal the debtor received from a group of noteholders in late June.
In a motion before the bankruptcy court, Exide said on Thursday that the nonbinding restructuring proposal it got from the unofficial committee of senior secured noteholders, which also holds the majority of the debtor’s $500 million DIP financing package, is the “likely path” the company will follow to emerge from Chapter 11.
But Exide’s working capital needs reach season peak in the summer and fall months as it works to build up inventory to meet increased winter demand, and it needs the extra financing to maintain an adequate liquidity cushion, the motion states.
The suspension of operations at its Vernon, California, lead-acid battery recycling plant — which was temporarily closed by state regulators in April 2013, prompting, in part, the bankruptcy filing — also plays a role in the need for the money, with Exide expecting it to cost up to $38 million in lost revenue to find an alternative source of lead, according to the motion.
“The additional time required to reforecast the debtor’s business plan, negotiations of a plan of reorganization are now coinciding with a cyclical highpoint in the debtor’s working capital requirements,” the motion states. “To meet the debtor’s liquidity requirements and provide a runway to emergence from Chapter 11, certain members of the [unofficial noteholders committee] have agreed to provide the debtor with an additional term loan commitment of approximately $65 million.”
The term loan will result in about $60 million in net cash proceeds after certain in-kind and other fees are factored in, and is in addition to Exide’s original DIP package, which consisted of a $275 million term loan and $225 million under an asset based loan facility approved at the debtor’s first-day hearing in June 2013, according to court records.
Exide revealed the reorganization proposal in a statement on June 30 and told the court about it during a hearing on July 2.
The plan aims to deleverage Exide, which is looking to restructure about $1 billion in debt, by roughly $700 million, and includes a $300 million new equity investment, a portion of which would be in the form of a rights offering and be backstopped by certain members of the noteholder committee, the debtor has said.
The proposed reorganization also includes $185 million in new debt borrowed from the same noteholders, as well as an asset-based loan obtained from an unidentified third party for an undisclosed amount, according to Exide.
Exide hopes to emerge from Chapter 11 by the end of the year and says it has a comprehensive five-year business plan for all of its business lines — industrial, recycling and transportation — for both its debtor and nondebtor operations.
The debtor, one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection in June 2013, 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 the debtor.
Exide has said that one of the factors that pushed it into bankruptcy was a California regulatory agency’s April 2013 order to halt operations at the Vernon plant.
A California judge blocked the order in July of that year, ruling that Exide is likely to win its challenge to the decision because it has reduced pollution levels at the facility, and the debtor has since struck an agreement with the state’s Department of Toxic Substances Control to invest $7.7 million into the plant to improve compliance with environmental standards.
Exide has said that new air pollution regulations that went into effect in April cast doubt on the facility’s future, and the debtor received approval on July 1 of an extension to the time period when it can exclusively file a plan to give creditors time to evaluate amended projections related to the new rules, according to court records.
Regulators adopted stiffer standards to limit arsenic emissions and imposed an April 10 deadline for the Vernon plant to modify its air pollution control system, according to court records.
Operations at the Vernon facility were halted in mid-March for scheduled maintenance, and have not resumed in the wake of the new regulations, Exide has said.
Exide is represented by Anthony W. Clark, Kristhy M. Peguero, Kenneth S. Ziman, J. Eric Ivester 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 and Jeff Sistrunk. Editing by Stephen Berg.