Kemet looks to restructure 6.66% notes, net worth covenant lowered through Aug. 31

By Caroline Salls

Pittsburgh, July 30 - Kemet Corp. said it is exploring alternatives to restructure or replace its 6.66% senior notes after noteholders agreed to lower the required minimum consolidated net worth covenant through Aug. 31 to avoid non-compliance, according to a company news release.

The company said it was in danger of failing to meet the minimum consolidated net worth covenant because of an impairment charge that will result from a company review of its asset value.

If it is not able to obtain new funds to redeem the senior notes, or is not otherwise able to restructure, replace or obtain an additional waiver of the covenant in question, Kemet said the noteholders would be able to declare the senior notes due and payable.

The company said acceleration of the notes would also trigger a default under its existing agreements with UniCredit, related to €96.8 million of outstanding debt.

In addition, Kemet said its failure to either repay the senior notes or the UniCredit facility when due, or if the repayment requirement under the notes agreement or UniCredit agreement is not reduced, the holders of the company's outstanding convertible senior notes due 2026 could accelerate those notes.

Kemet said it does not currently have the ability to repay the senior notes, the UniCredit facilities or the convertible senior notes.

According to the release, Kemet performs an annual test of impairment of its goodwill in the first quarter of each fiscal year and in any other quarter in which the company needs to reevaluate the value of its assets.

The company said it performed this evaluation during the second quarter.

As a result of this review, the company said it will record a $152.6 million estimated impairment charge, which reduces both goodwill and long-lived assets by $88.7 million and $63.9 million, respectively.

Kemet said the impairment was charged to its Ceramic Business Group and Film and Electrolytic Business Group in the amount of $76.4 million and $76.2 million, respectively.

"We announced today that we are taking swift actions to control our support costs and improve our financial results for the remainder of the fiscal year and provide a platform from which we can manage the business efficiently and at lower costs," chief executive officer Per Loof said in the release.

Kemet is a Simpsonville, S.C.-based manufacturer of tantalum, multilayer ceramic and solid aluminum capacitors.

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