Exide back in Chapter 11 bankruptcy to facilitate sale of businesses

By Caroline Salls

Pittsburgh, May 19 – Exide Technologies filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware to facilitate a value-maximizing sale of its North America, EMEA and Asia-Pacific businesses and further advance ongoing discussions with potential buyers, according to a company news release.

The company said in a statement filed with the court that this is its second Chapter 11 filing in seven years and third in its history.

Exide said its strategy for this latest filing is designed to restore its liquidity, which had deteriorated further as a result of the global health and economic impact of the Covid-19 pandemic, while the company pursues a sale of its assets.

The company said it has reached an agreement to sell its EMEA and Asia-Pacific business to an informal group of noteholders, subject to the receipt of higher or better offers in a court-supervised auction process.

The EMEA and Asia-Pacific business is not included in the Chapter 11 proceedings and continues to operate as usual.

Exide said the new owners intend to maintain continued employment of its workforce in these regions, and the purchase agreement includes a “go-shop” period with a bid submission deadline and auction to be held in early July.

Noteholder agreement

As part of the agreement, the ad hoc noteholder group has provided additional liquidity of up to $75 million to ensure that business remains in a strong financial position during the adverse economic impacts created by the Covid-19 crisis.

The company said the noteholders’ credit bid reflects a purchase price of $430 million, comprised of a $70 million discharge and release of exchange priority notes and first-lien notes, $25 million in the form of an assumption of 100% of the total claims outstanding under an interim financing facility, $161 million in the form of an assumption of 100% of the total claims outstanding under the super-priority notes indenture and $174 million in the form of assumption of 100% of claims outstanding under existing Exide Europe/ROW financing arrangements.

In connection with the credit bid, the noteholder group has also committed to provide an initial $25 million in interim financing to Exide International for working capital and general corporate purposes and up to $50 million of new-money exit financing, as well as to refinance all amounts owed by non-debtor Exide Technologies (Transportation) Ltd. under an ABL credit agreement or otherwise bifurcate the facility.

“Today’s actions are intended to position our businesses around the world for future growth and profitability while also providing the greatest benefit to our employees, customers and other stakeholders,” chairman, president and chief executive officer Tim Vargo said in the release.

“We believe this is an attractive business, and we are already advanced in a robust marketing process that includes active engagement with a number of potential strategic and financial buyers. We are pleased with the interest to date and look forward to continued discussions about new ownership that will drive forward our businesses in North America, EMEA and Asia-Pacific.”

First-day motions

In conjunction with the bankruptcy filing, Exide has obtained a commitment for $40 million in debtor-in-possession financing from a group of lenders, including some of its existing noteholders. Subject to court approval, the company said this DIP financing will provide sufficient liquidity to support ongoing operations in North America for the duration of the sale process and restructuring.

The terms of the DIP financing had not been filed as of Tuesday afternoon.

In addition, the company said it filed a series of customary motions seeking to uphold its commitments to its employees, customers and other stakeholders during the process, including requests to continue to pay wages and provide benefits to employees in the normal course and otherwise operate the business as usual to facilitate the continued manufacturing and delivery of product to customers without interruption.

Exide said it is also filing a motion to initiate a competitive bidding process.

The company said it is committed to working collaboratively with relevant local, state and federal agencies to achieve an orderly transfer or sale of its non-operating properties in the United States, including its former battery recycling facility in Vernon, Calif., and ensure they are maintained in a safe and responsible manner.

Debt details

According to court documents, Exide has $500 million to $1 billion in assets and $1 billion to $10 billion in debt.

The company’s largest unsecured creditors are California Department of Toxic Substances Control, based in Sacramento, with an $8.92 million regulatory fee claim and a $2 million government obligation claim; Daramic Inc. of Owensboro, Ky., with a $3.14 million trade claim; American Integrated Services of Wilmington, Calif., with a $2.1 million professional services claim; Transervice Logistics Inc. of Lake Success, N.Y., with a $1.98 million trade claim; Geosyntec Consultants, Inc. of Boca Raton, Fla., with a $1.37 million professional services claim; Data2Logistics, LLC of Ft. Myers, Fla., with a $1.31 million trade claim; and Onix Networking Corp. of Lakewood, Ohio, with a $1.11 million trade claim.

Weil, Gotshal & Manges LLP is serving as legal counsel to Exide, Houlihan Lokey is serving as investment banker, and Ankura is serving as financial adviser.

Exide Technologies is a Milton, Ga.-based maker and recycler of lead-acid batteries. The Chapter 11 case number is 20-11157.

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