EXIDE BANKRUPTCY BREAKING NEWS: Exide unsecured creditors blast extension for $560 million Debtor-in-Possession financing package

By Matt Chiappardi

Law360, Wilmington (October 24, 2014, 4:15 PM ET) — The unsecured creditors committee in battery maker Exide Technologies Inc.’s bankruptcy blasted late Thursday the debtor’s move to push back the maturity date on its $560 million debtor-in-possession financing package, arguing it forces the case into a position that only benefits a select few secured noteholders.
In a motion before the Delaware bankruptcy court, the official committee of unsecured creditors called for the court to order a “fair and appropriate” DIP financing process, and argued that the unofficial committee of secured noteholders is “concocting a scheme” that would lead to a one-party reorganization or a “ridiculously quick credit bid sale that, in either event, will only benefit certain members of the UNC.”

The creditors committee also contends that Exide hasn’t seriously considered alternatives to its DIP package, and suggests the court supervise a 30-day process to solicit other financing options, according to the motion.

“The debtor, a multinational business with operations in more than 80 countries, has apparently agreed — instead of negotiating for and obtaining a simple extension of the DIP facility for a reasonable amount of time and for a reasonable fee or better yet, a replacement DIP arrangement with a nonreluctant lender — to an overly restrictive and controlled ‘process’ with the UNC and the DIP agent which unfairly predetermines the debtor’s exit from Chapter 11,” the motion said.

The issue stems from Exide’s request earlier this month to amend its DIP facility to have it come due at the end of March instead of December after it said it had secured support for the measure from its post-petition lenders.

The changes would give the Georgia-based battery manufacturer a dual-track path forward with either a stand-alone restructuring of a Section 363 sale on the table, the company has said.

If Exide goes with a restructuring, it would need to file a Chapter 11 plan support agreement by Nov. 17 and a related disclosure statement roughly two months later.

A sale would need to have a stalking horse agreement filed by Dec. 23, bidding procedures approved about three weeks later, and a closing date before the DIP facility matures, according to court records.

The creditors committee argues that such a squeezed timeline for a sale appears to be tailored to have certain noteholders scoop up Exide through a credit bid without any real competition.

The sale milestone essentially forces bid procedures onto the process without giving any parties enough time to object, and doesn’t allow for any meaningful marketing process since the company has yet to be even shopped, the committee argues.

“There is no legitimate reason for the debtor to place itself in such a restrictive position,” the unsecured creditors said.

The committee also noted a litany of other provisions it opposed, including fees associated with the facility, redacted in the motion, and how certain of them are deemed not refundable; “unacceptable” expansion of the definition of an acceptable reorganization plan; and a section the unsecured creditors say gives the DIP lenders enhanced credit bidding rights, according to the motion.

Representatives for Exide did not immediately respond to requests for comment Friday, but in a motion it filed opposing the committee’s request to fast-track its motion, the debtor said the unsecured creditors objection was full of “hyperbole and unsupported allegations.”

Exide has been negotiating with its senior secured noteholders on a turnaround plan the debtor says will deleverage its balance sheet by $700 million and provide a $300 million equity investment.

The U.S. operations of Exide, one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection in June 2013, looking to restructure about $1 billion in debt.

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 a plant in the city of Vernon, which was blocked by a state judge’s ruling three months later that the debtor is likely to win its challenge to the decision because it has reduced pollution levels at the facility.

The company has said it hoped to emerge from Chapter 11 by the end of the year with a comprehensive five-year business plan for all of its business lines — industrial, recycling and transportation — for both its debtor and nondebtor operations.

The committee is represented by Robert J. Dehney, Eric D. Schwartz and Christopher M. Hayes of Morris Nichols Arsht & Tunnell LLP, as well as Kenneth A. Rosen, Paul Kizel Gerald C. Bender, Eric S. Chafetz and Elie J. Worenklein of Lowenstein Sandler LLP.

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 Andrew Scurria. Editing by John Quinn.

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