EXIDE VERNON BREAKING NEWS: Los Angeles says Exide’s bankruptcy deal regarding Vernon smelter moving too fast
LA Says Exide’s Ch. 11 Vernon Plant Deal Moving Too Fast
Law360, Wilmington (November 17, 2014, 5:05 PM ET) — Both the city and county of Los Angeles balked Monday at the speed of a nearly $50 million deal bankrupt Exide Technologies Inc. struck with California regulators over its troubled Vernon plant, arguing they need more time to evaluate how the settlement affects their environmental claims.
In a motion before the Delaware bankruptcy court, the city of Los Angeles asked U.S. Bankruptcy Judge Kevin J. Carey to postpone a scheduled Thursday hearing on the settlement, which would have Exide set aside $39 million in case the Vernon battery recycling facility ultimately closes down and pay up to $9 million to clean up nearby residential areas, for at least 30 days to give it more time to respond.
Judge Carey had granted the Georgia-based battery maker’s request to fast-track consideration of the proposed deal with the California Department of Toxic Substances Control Nov. 7, one day after Exide moved for settlement’s approval, but the city said Monday it’s not yet sure how the agreement will affect its unliquidated claims against the debtor based on investigations of “ongoing environmental violations,” according to the motion.
“The debtor’s motion to shorten did not set forth any real emergency or exigencies as a basis for the debtor to have the 2014 Vernon approval motion heard immediately,” the motion states. “More importantly, the people/city require additional time to evaluate the Vernon stipulation in order to evaluate the effect of the stipulation upon its claims against the debtor that seek to protect public safety and welfare, and effectuate public policy.”
The city’s motion, which is also lodged by attorneys representing the people of California, was joined in a separate filing by Los Angeles County, where Vernon and the plant are located.
An attorney for Exide declined to comment when contacted Monday.
The issue stems over a deal Exide struck with the California DTSC in connection with the plant that has faced intense environmental scrutiny, temporary closure of which by California regulators was one of the reasons the battery maker cited when it filed for Chapter 11 protection of its U.S. operations a year and a half ago.
A state judge blocked the closure in July 2013, ruling Exide was likely to win its challenge to the decision because it had reduced pollution levels at the facility.
But the plant went idle anyway months later for what the battery maker said was scheduled maintenance and hasn’t reopened since California regulators adopted stiffer standards to limit arsenic emissions and imposed an April 10 deadline for Exide to modify its air pollution control system.
Under the proposed settlement, which came in conjunction with an enforcement order from the DTSC, Exide says it has a path to reopen the facility and proceed with the final permit application process, reducing uncertainty surrounding the costs related to the plant and providing a “critical piece” needed for the debtor’s Chapter 11 exit plans.
One of the largest producers of lead batteries for the industrial and transportation markets, Exide sought court protection for its U.S. operations in June 2013 in an effort to restructure about $1 billion in debt.
The debtor said last week it had struck a Chapter 11 plan support agreement with the majority of its senior noteholders in which some of them agreed to convert at least $100 million of their debtor-in-possession credit facility claims into new second lien debt and roll the balance into a new exit term loan.
Exide was recently granted an extension of the maturity date of its $560 million in DIP financing to give it a longer runway out of bankruptcy, but only after the battery maker agreed to terminate its Chapter 11 exclusivity period.
The plan support agreement also calls for a new $175 million capital commitment to be raised by senior secured debtholders, but leaves the door open for Exide to pursue a bankruptcy sale instead of a stand-alone restructuring, according to a statement from the company.
The city of Los Angeles is represented by Marc J. Phillips of Manion Gaynor & Manning LLP, and James P. Clark and Wendy Loo of the Los Angeles City Attorney’s Office.
Los Angeles County is also represented by Marc J. Phillips of Manion Gaynor & Manning LLP, as well as Barry S. Glaser and Susan M. Freedman of Steckbauer Weinhart 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, Andrew Scurria, Jeff Sistrunk and Evan Weinberger. Editing by Katherine Rautenberg.