Hayes Lemmerz files bankruptcy; some DIP loans to convert into equity

By Caroline Salls

Pittsburgh, May 12 - Hayes Lemmerz International, Inc. made a pre-packaged Chapter 11 bankruptcy filing Monday in the U.S. Bankruptcy Court for the District of Delaware after reaching a restructuring agreement with the lenders holding a majority of its secured debt, according to a company news release.

Hayes Lemmerz Finance LLC - Luxembourg SCA, a borrower under the company's secured credit facility and issuer of its senior notes, was also included in the bankruptcy filing.

Under the proposed restructuring, the company's debtor-in-possession financing lenders will convert some of their loans into equity and will own substantially all of the equity of the reorganized company.

"The Chapter 11 filings were precipitated by an unprecedented slowdown in industry demand and a tightening of credit markets," chairman and chief executive officer Curtis Clawson said in the release.

"These filings will allow us to reduce our debt and restructure our balance sheet. We fully expect to emerge from Chapter 11 as a stronger, more competitive company than we are today."

Some of the company's secured lenders have agreed to provide a $100 million debtor-in-possession loan. Including the DIP loan, Hayes Lemmerz said it will have about $138 million of total liquidity.

According to the motion, the pre-bankruptcy lenders have agreed to provide at least $80 million in DIP financing, with the potential for an additional $20 million.

Financing concerns

Hayes Lemmerz said some of its pre-bankruptcy lenders and other parties in interest, including the members of an informal committee of euro noteholders, have concerns about the proposed DIP agreement, but the company said the proposed terms are the best available given current global economic conditions.

"The loan-to-own structure in the DIP financing - the prepetition lenders effectively are loaning new money as a stalking-horse to buy the equity of the reorganized debtors - has emerged as one of the few viable mechanisms for lenders to allow major U.S. businesses, particularly those in the depressed automotive sector, to survive the current world-wide crisis," the company said in the motion.

DIP loan terms

Deutsche Bank Trust Co. Americas is the administrative agent on the DIP facility.

Interest before the roll-up elevation will be Eurodollar plus 1,400 basis points on Eurodollar loans and Base rate plus 1,300 bps on Base rate loans, and interest after the roll-up elevation will be Eurodollar plus 700 bps and Base rate plus 700 bps.

The facility will mature on the earliest of six months from entry of the interim order, the effective date of a plan of reorganization, 40 days after entry of the interim order if a final order has not been entered and termination in connection with an event of default.

Hayes Lemmerz will pay an upfront fee of 4% of the new money term loans, a 3% exit fee and a consent fee of 8.5% of the common stock in the reorganized company to pre-bankruptcy lenders that did not choose to participate in the DIP financing but agreed to enter into the DIP financing agreement.

The company is seeking interim access to $30 million of the DIP financing.

Hayes Lemmerz has filed a variety of first-day motions, including a motion seeking approval of the DIP loan, that will allow it to continue to conduct business without interruption.

Debt details

According to court documents, Hayes Lemmerz had $1.34 billion in total assets and $1.41 billion in total debt as of Jan. 31.

The company's largest unsecured creditors include HLI Retirement Plan Master Trust, based in Northville, Mich., with a $205 million retiree obligations claim and indenture trustee U.S. Bank, based in Minneapolis, with a $177.09 million bond debt claim.

The company's financial adviser is Lazard Freres & Co., LLC, and AlixPartners, LLP is Hayes Lemmerz's restructuring adviser.

Hayes Lemmerz is a Northville, Mich., maker of automotive and commercial highway wheels. The Chapter 11 case number is 09-11655.

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