Hayes Lemmerz: Recapitalization improves free cash flow, significantly reduces debt

By Lisa Kerner

Charlotte, N.C., June 7 - Hayes Lemmerz International, Inc. is "off and rolling like a muscle car" and plans to use its muscle to extend its lead in the global wheel business, according to comments made by president, chief executive officer and chairman Curt Clawson during the company's first-quarter earnings call on Thursday.

While cash flow for the quarter was reported at a negative $5 million, Clawson was confident that cash flow for the year will be positive.

Restructuring the balance sheet was one of the company's main short-term goals, Clawson said. He highlighted completion of the $180 million equity rights offering and refinancing on May 30, noting that the rights offering was "significantly oversubscribed by existing shareholders."

Chief financial officer Jim Yost spent a good portion of the call reviewing the company's recapitalization and debt reduction.

Yost said the oversubscribed rights offering was used to leverage the refinancing of all Hayes Lemmerz's major debt and to retire high-cost debt. The $321 million term loan B at Libor plus 350 basis points was replaced by a $351 million term loan B at Euribor plus 275 bps, while the $150 million term loan C at Libor plus 600 bps was eliminated.

Senior notes of $157 million at 10½% were replaced in the European subsidiary with $175 million of notes at 8¼%.

The rate and spread on the company's $10 million revolver was also reduced substantially. As a result, Hayes Lemmerz reduced its debt on a pro forma basis by $140 million, to $550 million, with annualized interest savings expected between $24 million and $25 million, according to Yost.

Liquidity was up $80 million for the quarter, to $217 million, as a result of the recapitalization, Yost noted.

Hayes Lemmerz has not changed its financial outlook from prior guidance and anticipates sales of $2.2 billion, adjusted EBITDA between $200 million and $210 million and capital expenditures in the range of $90 million to $95 million plus positive free cash flow.

Based in Northville, Mich., Hayes Lemmerz is a supplier of automotive and commercial highway wheels, brakes and powertrain components.

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