Stanadyne files Chapter 11 bankruptcy facing rising interest rates

By Sarah Lizee

Olympia, Wash., Feb. 16 – Stanadyne LLC and three affiliates filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the District of Delaware, being unable to sustain operations in the face of their current debt service levels.

“The debtors filed these Chapter 11 cases because they will not be able to outrun their current interest rates, which have crippled the debtors and drained liquidity since the rapid rise in their variable rates,” John Pinson, the company’s chief executive officer, said in a declaration.

He also said the Covid-19 pandemic and supply chain issues negatively impacted the debtors’ operations.

Pinson said the Chapter 11 process would allow the debtors to “hit the reset button” and provide the breathing room needed to reorganize and emerge as financially stable and improved companies.

The debtors plan to continue to operate their business during the pendency of the cases through the effective date of a reorganization plan. As such, Stanadyne is seeking court approval of first-day motions to minimize the adverse effects of starting the proceedings.

Stanadyne’s prepetition capital structure includes a financing agreement dated May 2, 2017 with Cerberus Business Finance, LLC as collateral agent and administrative agent for the secured lenders. Under the financing agreement, the lenders have made term loans totaling $248.49 million and revolving loans totaling $25 million, for a total current principal balance of $273.49 million.

The prepetition secured lenders purport to have first-priority liens on substantially all assets of Stanadyne LLC, Stanadyne PPT Holdings, Inc. and Pure Power Technologies, Inc., as well as a pledge of 65% of Stanadyne LLC’s ownership interests in its non-debtor affiliates located in Italy and India.

Interest under the credit agreement accrues under a variable interest rate and is due monthly at the start of each month. The debtors made all required interest payments through and including the interest payment due at the beginning of November 2022. The dates on which interest and principal were due from Dec. 1 and Feb. 1 have been extended.

Pinson said the interest rates are into the teens now, with potentially more rate hikes on the horizon. The debtors’ debt service obligations for 2023 are expected to total about $39 million.

“Had the debtors made all required debt service payments in December and early January, they would have run out of money,” Pinson said.

In November, the debtors started engaging Cerberus in good-faith discussions, Pinson added.

In its petition, the company listed 1,000 to 5,000 creditors, $100 million to $500 million in assets and $100 million to $500 million in liabilities.

Its top two largest unsecured claimholders are Cerberus, based in New York, with a bank loan unsecured deficiency claim, and Pension Benefit Guaranty Corp., based in Washington, with a pension claim. The amounts of these claims are unknown.

Next in line are Ford Motor Co., based in Dearborn, Mich., with a $9.33 million core claim, Corinth Core Center, based in Corinth, Miss., with a $4.74 million core claim, and Autocam Corp., based in Kentwood, Mich., with a $1.06 million trade claim.

Stanadyne is an automotive parts manufacturer based in Jacksonville, N.C. The Chapter 11 case number is 23-10207.

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