EXIDE BANKRUPTCY UPDATE: Unsecured creditors say Exide’s Chapter 11 plan won’t fly
Exide Unsecured Creditors Say Ch. 11 Plan Won’t Fly
Law360, Wilmington (January 02, 2015, 7:33 PM ET) — The unsecured creditors committee for bankrupt Exide Technologies Inc. blasted the battery maker’s disclosure statement Friday, arguing it describes a “patently unconfirmable” plan that was proposed in bad faith because the debtor only negotiated with certain secured noteholders who the committee claims will get all the company’s value.
In a motion before the Delaware bankruptcy court, the official committee of unsecured creditors said that going ahead and soliciting creditors on the plan would be a waste of time and resources and that it doesn’t take into account the value of certain assets such as the results of an investigation into how Exide might have been the victim of supposed lead price fixing, as well as certain intellectual property rights.
Instead, Exide has a disclosure statement for a plan that essentially hands over all of the value of the debtors’ assets to senior noteholders and has only “paid mere lip service” to the unsecured creditors committee’s concerns, the committee said.
“The debtor is effectively seeking court approval of a fundamentally deficient disclosure statement for a foreclosure sale disguised as a plan of reorganization,” the committee’s objection states. “The plan was proposed in bad faith as the committee and other stakeholders were not included in plan negotiations between the debtor and the unofficial noteholders committee.”
The unsecured creditors committee also argues that Exide’s plan would not be confirmable because its third-party releases are too broad and it is missing crucial information including how general unsecured claims will be treated, a liquidation analysis, a valuation analysis, or a list of waived avoidance actions.
The Bankruptcy Code does not permit the debtor “to file what amounts to a ‘disclosure statement term sheet’ as a place-holder and then at some point shortly prior to the disclosure statement hearing (potentially after the objection deadline) unveil the real disclosure statement that is materially different than the original,” the unsecured creditors say in their motion. “That, however, is precisely what the debtor is attempting to do here.”
If the disclosure statement is approved, the committee asks that a letter indicating unsecured creditors recommend voting down the plan be included in the solicitation package.
An attorney for Exide declined to comment when contacted Friday.
Exide proposed its Chapter 11 plan in November, seeking to trim about $600 million from its roughly $1.4 billion in current liabilities, which include $675 million in outstanding principal on the senior secured notes and more than $546 million owed under a debtor-in-possession financing package.
Eligible senior noteholders — defined as accredited investors or qualified institutional buyers — would receive 15 percent of the reorganized company’s equity under the plan and the chance to participate in a $175 million rights offering for new second-lien convertible notes, as well as the option to purchase a portion of the $346.8 million in DIP term loan claims, according to court records.
The plan, backed by a majority of senior noteholders, also leaves the door open for Exide to continue to market itself and choose a bankruptcy sale if it would provide a better return for stakeholders, court records state.
In December, the battery maker’s disclosure statement also came under scrutiny from two senior bondholders, who hold a total of $4 million in notes.
The creditors argued that certain noteholders would be getting a better payout than retail bondholders such as themselves would receive, inequitable treatment they contended rendered the plan unconfirmable, according to their objection.
U.S. Bankruptcy Judge Kevin J. Carey is scheduled to consider Exide’s disclosure statement on Jan. 12.
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.
The Georgia-based company cited numerous reasons for its entry into Chapter 11, including rising production costs, intense competition, reduced access to credit and an April 2013 order by a California regulatory agency that halted operations at one of its plants, a move blocked by a state judge’s ruling three months later.
The creditors committee is represented by Robert J. Dehney, Eric D. Schwartz and Erin R. Fay of Morris Nichols Arsht & Tunnell LLP, and Kenneth A. Rosen, Sharon L. Levine, Paul Kizel and Gerald C. Bender 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 Jeremy Barker.