Metaldyne files bankruptcy, receives two non-binding purchase offers

By Caroline Salls

Pittsburgh, May 28 - Metaldyne Corp. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of New York and has entered into two non-binding letters of intent to sell a majority of its assets as a going concern, according to a company news release.

Metaldyne said it filed bankruptcy to address liquidity needs and to restructure its debt.

According to the release, RHJ International, which holds a majority stake in Metaldyne's parent Asahi Tec Corp., and the Carlyle Group have submitted separate letters of intent to purchase different portions of Metaldyne's assets.

Under terms of the RHJ letter of intent, RHJ has proposed a purchase of some of the North American and European assets of Metaldyne's sintered products, vibration control products and powertrain products business units, as well as the European forging products business unit.

RHJ's proposal includes consideration consisting of up to $25 million in cash, the issuance of a new $50 million term note by the newly formed entity, the rollover of a roughly $20 million existing demand note owed by Metaldyne's German subsidiary to RHJ, the assumption of intercompany obligations related to that note and the assumption of other liabilities.

In addition, RHJ has agreed to inject additional cash into the newly formed entity that will acquire the Metaldyne assets to help ensure that it can meet its short-term liquidity needs.

Under the terms of its letter of intent, Carlyle has proposed a purchase of some of Metaldyne's chassis business assets in the United States, Mexico and Spain. The purchase price was not disclosed.

The proposed transactions are subject to execution of definitive purchase agreements, court approval and other customary conditions. Interested parties will have an opportunity to submit higher and better offers for Metaldyne's assets.

Metaldyne said it is seeking other potential buyers for assets not included in the letters of intent and will continue to work with its customers on other alternatives.

Parent not included

The company said Asahi Tec is not a part of the bankruptcy filing, and Metaldyne has been advised that Asahi Tec will now focus on its Japanese businesses and will no longer continue its economic support for Metaldyne.

"We are grateful for the support Asahi Tec has provided since it purchased Metaldyne in 2007, particularly in connection with how Asahi Tec helped us to eliminate approximately $400 million of debt from our balance sheet," Metaldyne chairman, president and chief executive officer Thomas A. Amato said in the release.

"Unfortunately, despite this significant debt reduction, the impact from the macroeconomic environment of declining industry volumes, a tight credit market and the uncertainty in the marketplace were simply too large to overcome without a broader in-court restructuring."

The company said its decision to file bankruptcy came despite extensive restructuring initiatives implemented over the last 17 months, including significant cost reductions with an annualized value of $100 million and the completion of a bond tender offer, which contributed to the Metaldyne's deleveraging.

DIP loan terms

To fund its continuing operations during the restructuring, Metaldyne has secured an $18.5 million debtor-in-possession financing facility from Deutsche Bank AG, New York, which will be funded through economic participations purchased by some of Metaldyne's customers.

The DIP facility will be used for the company's normal working capital requirements, including employee wages and benefits, supplier, utility and lease payments, and other operating expenses during the reorganization process.

Interest will be Prime rate plus 200 basis points.

The DIP facility will mature on the earliest of the latest asset sale closing date, the occurrence of an event of default and 60 days after entry of the interim order if a final order has not been entered.

A total of $11.7 million of the DIP financing will be available on an interim basis.

Debt details

According to court documents, the company has $500 million to $1 billion in both assets and debt.

Metaldyne's largest unsecured creditors include:

• Indenture trustee the Bank of New York Trust Co., based in Chicago, with a $29.32 million unsecured bond debt claim and a $1.49 million unsecured bond debt claim;

• Chrysler Motors LLC of Auburn Hills, Mich., with a $27.5 million notes claim;

• Ford Motor Co., based in Dearborn, Mich., with a $22.75 million notes claim;

• General Motors Corp. of Warren, Mich., with a $9.75 million notes claim;

• General Aluminum Manufacturing of Cleveland, with a $3.47 million trade debt claim;

• Citation Corp. of Novi, Mich., with a $2.4 million trade debt claim;

• SKF USA Inc. of Plymouth, Mich., with a $2.28 million trade debt claim;

• Hoeganaes Corp. of Cinnaminson, N.J., with a $1.72 million trade claim;

• Dana Corp. Axle Components Plant of Dry Ridge, Ky., with a $1.61 million trade debt claim; and

• Jerdau MAC Steel of Jackson, Mich., with a $1.38 million trade debt claim.

Metaldyne's restructuring adviser is Lazard Freres, and its financial adviser is AlixPartners. Metaldyne is also represented by Foley & Lardner as conflicts counsel.

Metaldyne is a Plymouth, Mich.-based maker of metal-based components, assemblies and modules for transportation-related powertrain and chassis applications.

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