Meridian Technologies files CCAA case to complete restructuring; lenders to swap debt for equity

By Caroline Salls

Pittsburgh, June 13 - Meridian Technologies Inc. has filed for protection under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice to implement a restructuring agreement reached with its lenders, according to a company news release.

Under the restructuring agreement, a newly reorganized company is being created with a recapitalized balance sheet and significantly lower debt burden.

Specifically, Meridian's secured lenders, led by agent GE Commercial Finance, have agreed to provide the newly reorganized company with $55 million in new financing, consisting of a $30 million revolving credit facility and a $25 million term loan upon closing.

In addition to the new financing, the company's secured lenders will exchange a significant portion of the existing debt for all of the equity in the newly reorganized company.

According to the release, the restructuring will result in a new Meridian Lightweight Technologies with a significantly deleveraged balance sheet and sufficient liquidity to support its operations and execute its strategic plan to return to profitability.

"This agreement is excellent news for our company, our employees and our suppliers and customers worldwide because it means that the cloud of uncertainty that has created doubts about our long-term viability has been swept away," Meridian chief restructuring officer Robert M. Caruso said in the release.

"This transaction, including the new capital and reduced debt level that will result from it, is the last step necessary to position the new Meridian Lightweight Technologies to overcome the current industry conditions that have hampered our ability to achieve sustainable profitability, including increasing magnesium costs, declining OEM production volumes and a weakened U.S. dollar."

To fund operations during the CCAA process, the secured lenders have also arranged $20 million in interim financing, according to the release.

Meridian said its plan of arrangement will transfer ownership of its assets, including the equity of the company's subsidiaries, to the new Meridian Lightweight Technologies.

"We are seeking to have the plan approved and sanctioned by the court very quickly," Caruso said in the release.

"Because of the new financing and expedited timeframe of the CCAA proceedings, we do not expect that our suppliers, customers or employees will notice any difference in our daily operations while we use the CCAA process to implement this transaction."

Meridian said it does not plan to file a Chapter 11 bankruptcy case in the United States or a similar insolvency proceeding anywhere else in the world.

The company said it is implementing a long-term strategic plan to strengthen its operations, including reducing its cost structure and opening a new manufacturing facility in Mexico by the end of 2008.

Meridian is a Strathroy, Ont.-based magnesium auto parts manufacturer.

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