Spectrum granted interim access to $235 million DIP facility; final hearing March 4

By Caroline Salls

Pittsburgh, Feb. 6 - Spectrum Brands has received interim court approval to access up to the full amount of a $235 million debtor-in-possession facility to fund its operations as it seeks to implement a pre-negotiated debt restructuring, according to a company news release.

The company said it also received interim or final court approval for a variety of other customary "first-day" motions that will help ensure that Spectrum and all of its operating units continue to meet their obligations to suppliers, customers and employees in the ordinary course of business during the restructuring process.

"If the refinancing is implemented as proposed, it would reduce the amount of debt on our balance sheet by approximately $840 million, eliminate approximately $95 million in annual cash interest payments for at least each of the next two years, and free up additional cash that can be reinvested in the business to support meaningful revenue and profit growth," chief executive officer Kent Hussey said in the release.

Spectrum said it expects the restructuring to be completed in four to six months.

As previously reported, Spectrum Brands has received commitments for $235 million in DIP financing from some of its existing asset-backed facility lenders with a participating interest from some of the company's existing noteholders, which represents an incremental $70 million in cash availability at the outset of the proceedings, subject to certain limitations and reserves.

Wachovia Bank NA is the DIP agent.

The facility consists of $190 million of revolving loan commitments, including a $20 million sublimit for letters of credit and a $20 million sublimit for swingline loans, and a $45 million asset-based revolving supplemental loan.

D.E. Shaw & Co., Avenue Capital Management and Harbinger Management are supplemental loan participants.

Proceeds of the DIP facility will be used to pay related costs, expenses and fees, as well as for working capital and general corporate purposes.

The DIP facility will mature on the earliest of 12 months after the bankruptcy filing date, 45 days after entry of the interim order if the final order has not been entered and the effective date of a plan of reorganization.

The maturity of the supplemental loan will be automatically extended to March 31, 2012; provided that a portion of the supplemental loan will be rolled on terms agreed between the company and the loan participants and will contain waterfall provisions that will give Avenue Capital Management priority on a portion of the rolled facility.

All borrowings will bear interest at either Base rate plus 350 basis points or the adjusted Eurodollar rate plus 450 bps, at the borrower's option, except that the supplemental loan will bear interest at the adjusted Eurodollar rate plus 1,450 bps.

The final DIP financing hearing is scheduled for March 4.

Spectrum Brands is an Atlanta-based consumer products company and supplier of batteries, lawn and garden products, pet supplies, shaving and grooming products, household insect control products, personal care products and portable lighting.

The company filed for bankruptcy on Feb. 3 in the U.S. Bankruptcy Court for the Western District of Texas. Its Chapter 11 case number is 09-50455.

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