Exide Files for Bankruptcy After Losing Wal-Mart Business
After the April shutdown in Vernon, California, Exide sped up its restructuring plans by hiring law firm Skadden, Arps, Slate, Meagher & Flom LLP and financial adviser Alvarez & Marsal North America LLC, according to court records.
“As a result of the Vernon shutdown and the company’s poor financial performance in the fourth fiscal quarter of 2013, it became apparent that a successful out-of-court restructuring was unlikely,” Chief Financial Officer Phillip Damaska said in a filing today in U.S. Bankruptcy Court in Wilmington, Delaware.
The company, based in Milton, Georgia, listed debts of $1.14 billion and assets of $1.89 billion in its Chapter 11 filing. The filing won’t affect obligations outside the U.S., Exide said in a statement. Exide has about 3,600 employees and operations in more than 80 countries, making lead-acid batteries used in cars, trucks, tractors and boats.
The California Department of Toxic Substances and Control ordered Exide to suspend operations at the recycling plant on April 24, saying the facility didn’t comply with state health standards, the company said the next day in a regulatory filing.
Exide said it disputes the regulators’ findings and is fighting to reopen the plant. In the meantime, the company has a short-term source to replace lead it got from the Vernon plant and is trying to secure a long-term supply, according to court papers.
The company began a restructuring effort after Wal-Mart Stores Inc. (WMT) in 2010 switched to Johnson Controls Inc. (JCI) to supply automotive batteries, Damaska said in the filing. The loss of Wal-Mart as a customer reduced Exide’s sales by about $160 million a year, he said. Wal-Mart, based in Bentonville, Arkansas, is the world’s largest retailer.
The closing of the Vernon plant will cut about $24 million from Exide’s earnings before taxes, interest and depreciation, a common financial measure known as Ebitda, Damaska said.
Exide also blamed the economic slowdown in Europe, where it gets about half of its revenue. In the first three months of this year, Ebitda fell to $14 million from $54 million in the same period in 2012, the company said.
The company’s 8.625 percent bonds due in 2018 climbed more than 3 percent to 60.375 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Exide issued the bonds in 2011, when it borrowed $675 million.
The company has $31 million in interest payments due in August, Damaska said. Among the largest unsecured creditors listed in court papers are holders of $51.9 million in floating-rate convertible notes due in September.
Exide is asking a judge’s permission to borrow as much as $500 million from lenders led by JPMorgan Chase & Co. to help carry it through bankruptcy, according to court papers.
The case is In re Exide Technologies, 13-11482, U.S Bankruptcy Court, District of Delaware (Wilmington).
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