Murray Capital Management sues Exide Technologies, Deutsche Bank in connection with March bond deals

By Paul A. Harris

St. Louis, Oct. 6 - New York private investment firm Murray Capital Management, Inc. (MCM) disclosed in a Thursday news release that it has filed suit against Exide Technologies and Deutsche Bank Securities.

The suit, filed in the U.S. District Court, Southern District of New York, relates to the sale of Exide Technologies' $290 million issue of 10½% senior secured second-lien notes due March 15, 2013 and its $60 million issue of convertible senior subordinated floating-rate notes due Sept. 18, 2013.

Deutsche Bank Securities was joint bookrunning manager of the issues, both of which settled on March 18, 2005.

A source familiar with the matter told Prospect News on Thursday that it is MCM's position that relevant information was not being disclosed to the investors to whom the Rule 144A notes were being marketed.

The source added that Exide's fiscal year ended on March 31, 2005, 13 days after the bonds settled. On May 16, less than six weeks after the bonds settled, Exide made an announcement that it was likely that it had violated bank covenants with respect to its EBITDA and its leverage ratio, the source continued.

That information, the source added, would have been material to the bond offering.

A market source told Prospect News late Thursday afternoon that Exide's 10½% fixed-rate note was trading at 79.50 bid, unchanged on the day, while the convertible was trading up 0.125 point on the day at 51.125 bid, 51.25 offered.

The press release from MCM went on to state that Exide is also being sued by certain of its common stockholders in two other lawsuits. Furthermore, MCM said, Exide has disclosed that it has been informed by the Enforcement Division of the U.S. Securities and Exchange Commission that the SEC has begun a preliminary inquiry into statements Exide made earlier in 2005 about Exide's ability to comply with its fiscal 2005 loan covenants and the going concern qualification in Exide's annual report for fiscal 2005, filed with the SEC in June 2005.

The suit also names Craig Muhlhauser, president and chief executive officer of Exide until his resignation in April 2005, and J. Timothy Gargaro, chief financial officer and executive vice president of Exide.

Scott Beechert, general counsel of MCM, states in the press release that "we are seeking full recovery on behalf of our clients for the decline we experienced in the value of our Exide securities in May 2005."

Both Exide and Deutsche Bank Securities declined to comment when contacted on Thursday by Prospect News.

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