Exide files for bankruptcy

On 10 June, Exide Technologies filed for Chapter 11 bankruptcy protection in the US. This is the second time it has done so since the Millennium; in April 2002 the stored electrical solutions company also submitted a Chapter 11 application in the District of Delaware. Exide says it took this step to “facilitate the financial and operational restructuring necessary to strengthen its balance sheet and its business to position the company for future success.” It also says it intends to “become more aggressive in reducing costs, taking actions with respect to underperforming business segments and focusing on the most attractive areas for future growth.” Only the company’s operations in the United States are affected by the filing, and Exide Technologies confirms that it plans to “operate globally without interruption during the reorganisation.”

“Operations both in the US and in the rest of the world will continue to serve customers in a timely manner with the same quality products, and outstanding customer care as they did before the filing,” said Exide president and chief executive officer James R. Bolch. “All post-filing obligations to US suppliers will be paid on time and within terms. We intend to pay US employees as usual and do not expect any material changes to their benefits. Outside of the US, obligations to employees and suppliers will not be impacted by the filing.”

Exide has negotiated a US$500 million debtor-in-possession (DIP) financing facility to be provided by a group of financial institutions and investors in connection with the filing. Once approved by the court, this financing will enhance the company’s global liquidity position with approximately $300 million in new capital, in order to allow it to pursue its restructuring goals. The proceeds of the DIP financing together with cash generated from daily operations and cash on hand will be used to fund post-petition operating expenses. Exide’s global management team will continue to manage both the US and global businesses.

“Our company has been burdened by a highly leveraged balance sheet which has limited our ability to competitively invest in our businesses,” Bolch added. “Recently, our profitability has been impacted by unprecedented increases in our product costs — driven primarily by the market price of scrap lead in North America – as well as operational challenges in the US and Europe which we have been unable to fully offset. After a great deal of consideration, we concluded a restructuring of our balance sheet and our operations was the best path forward for the company.”

“Our restructuring,” he continued, “will allow us to strengthen our balance sheet and complete the operational changes that build upon the strategies that we have been pursuing. Over and above these efforts, we intend to become even more aggressive in reducing costs, taking actions with respect to underperforming business segments and to focus on the most attractive areas for future growth.”

In order to help facilitate the company’s financial restructuring, Exide’s Board of Directors has named Robert M. Caruso as chief restructuring officer.  Caruso is a noted financial restructuring expert and a managing director of Alvarez and Marsal, a leading restructuring firm.  Bolch stated: “As we move forward with Exide’s restructuring, the Board concluded that we needed to have personnel with restructuring expertise on our executive team in order to implement critical objectives most effectively. We are very fortunate to have the benefit of the expertise, experience and demonstrated talent of Bob Caruso to take on the role of chief restructuring officer of Exide at this important time. He and the resources he brings from Alvarez and Marsal, will serve the company and all of its constituencies very well as we proceed with the job of restructuring Exide for the future.”