Libbey files Chapter 11 bankruptcy to navigate effects of Covid-19

By Caroline Salls

Pittsburgh, June 1 – Libbey Inc. and its U.S. subsidiaries filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware to strengthen its balance sheet to navigate the effects of the Covid-19 pandemic and better position the company for the future, according to a news release.

Libbey’s international subsidiaries in Canada, China, Mexico, the Netherlands and Portugal are not included in the Chapter 11 proceedings and are operating in the normal course of business.

The company said it is continuing discussions with its lenders and other stakeholders regarding the terms of a consensual financial restructuring plan.

In conjunction with the bankruptcy filing, some of Libbey’s existing lenders have agreed to provide up to $160 million in debtor-in-possession financing, including a $100 million revolving credit facility and a $60 million term loan.

Following court approval, the company said it expects this financing, together with cash flow from operations, to support the business during the court-supervised process.

Cortland Capital Market Services LLC will serve as administrative agent and collateral agent for the term loan. JPMorgan Chase Bank, NA is the administrative agent for the ABL facility.

Interest on the term loan will accrue at the Base rate plus 1,000 basis points with a 2% floor or Eurodollar plus 1,100 bps with a 1% floor. Interest on the ABL facility will accrue at Libor plus 350 bps.

Both facilities will mature 180 days from the bankruptcy filing date.

A total of $30 million of the DIP term loan is expected to be available on an interim basis.

According to the release, Libbey is continuing to serve customers and end users globally and will continue to evaluate the operating environment and make adjustments, as necessary, to adapt to the impact of Covid-19.

“While we entered 2020 with positive momentum from our strong finish in 2019, the dramatic and prolonged impact of Covid-19 on the demand for our products and on our business is truly unprecedented in Libbey’s more than 200-year history,” chief executive officer Mike Bauer said in the release.

“As a result, entering this process is a necessary step to address our liquidity, strengthen our balance sheet and better position Libbey for the future. We believe this process will help Libbey become an even stronger, more influential partner to our customers, vendors and end users.

“We are already seeing some improvement in our end markets with the gradual lifting of stay-at-home restrictions, and during the past few weeks have reopened our U.S. distribution centers and restarted several production lines in Toledo, Ohio, and Shreveport, La.”

Libbey said it is filing customary first-day motions that will allow it to smoothly transition its business into Chapter 11, including obtaining court approval to pay employee wages and benefits and honor customer commitments in the ordinary course of business. The company will also pay vendors in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.

According to court documents, Libbey has $706.69 million in assets and $732.47 million in debt.

The company’s largest unsecured creditors are Microsoft Corp., based in Redmond, Wash., with a $3.59 million trade claim; UTC Overseas Inc. – Brokerage and Duties of Houston, with a $3.32 million trade claim; and Shandong Silver Phoenix Co., Ltd. of Shandong, China, with a $1.68 million trade claim.

Libbey said in an 8-K filed with the Securities and Exchange Commission that the compensation committee of its board of directors approved a $900,000 retention bonus for Bauer.

Bauer will be required to repay some or all of the bonus if he is terminated for cause or voluntarily resigns without good reason or if the company does not achieve cash-flow milestones.

Latham & Watkins LLP is serving as legal adviser to Libbey, Alvarez & Marsal is serving as restructuring adviser, and Lazard is serving as financial adviser.

Libbey is a Toledo, Ohio-based glassware manufacturer. The Chapter 11 case number is 20-11439.

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