Ankura is serving as financial advisor, Houlihan Lokey is serving as investment banker and Weil, Gotshal & Manges is serving as legal counsel to Exide Technologies, which filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The filing is part of Exitde’s strategy to best position its businesses in North America, EMEA and Asia-Pacific to benefit its employees, customers, suppliers and other stakeholders across the globe. This strategy is designed to restore the company’s liquidity, which has deteriorated further as a result of the COVID-19 pandemic, while the company pursues a sale of its assets.
The company has separately reached an agreement to sell its EMEA and Asia-Pacific business to an ad hoc group of its noteholders, subject to certain conditions outlined in the transaction documents, and subject to higher or better offers. This business is not included in the Chapter 11 proceedings and continues to operate as usual.
“Today’s actions are intended to position our businesses around the world for future growth and profitability while also providing the greatest benefit to our employees, customers and other stakeholders,” Tim Vargo, chairman, president and CEO of Exide, said. “Our board of directors determined that, given the continued, unsustainable impact on our cost structure resulting from legacy liabilities in North America, and in light of the global economic COVID-19 slowdown that has amplified these pressures, a sale of our North American operations through a court-supervised process provides the best opportunity to continue delivering high-quality energy storage solutions and service to our customers.
“We believe this is an attractive business, and we are already advanced in a robust marketing process that includes active engagement with a number of potential strategic and financial buyers. We are pleased with the interest to date and look forward to continued discussions about new ownership that will drive forward our businesses in North America, EMEA and Asia-Pacific. I’d like to thank all of our employees for their unwavering commitment and hard work during this time of transition.”
Exide obtained a commitment for debtor-in-possession financing of $40 million from a group of lenders, including certain of its existing noteholders. Subject to court approval, this DIP financing will provide sufficient liquidity to support ongoing operations in North America for the duration of the sale process and restructuring.
To ensure a smooth transition into Chapter 11, the company filed a series of customary motions seeking to uphold its commitments to its employees, customers and other stakeholders during the process. These “first day” motions include requests to continue to pay wages and provide benefits to employees in the normal course and otherwise operate the business as usual to facilitate the continued manufacturing and delivery of product to customers without interruption. The company also is filing a motion to initiate a competitive bidding process under Section 363 of the Bankruptcy Code, designed to achieve the best offers for the North American, EMEA and Asia-Pacific businesses.
During the proceedings, Exide will work with the relevant local, state, and federal agencies to achieve an orderly transfer or sale of its non-operating properties in the U.S., including its former battery recycling facility in Vernon, CA, and ensure they are maintained.
Separately, Exide entered into a restructuring support agreement under which an ad hoc group of the company’s noteholders would acquire its EMEA and Asia-Pacific business, subject to certain conditions outlined in the transaction documents and subject to higher or better offers. The new owners intend to maintain continued employment of the company’s workforce in these regions. The agreement includes a “go-shop” period with a bid submission deadline and auction to be held in early July 2020.
“We have been steadily growing revenue and market share in EMEA and Asia-Pacific over the past few years,” Vargo said. “As our lenders have learned more about this business, they were impressed by its growth trajectory, loyal customer base and talented employees. Their increased support reflects their confidence in our capability to deliver consistent growth and profitability by bringing to market innovative technologies for energy storage across each business segment to benefit our customers. We are pleased to have found a new owner that is committed to supporting the next phase of growth of our business in these regions.”
As part of the agreement, the ad hoc noteholder group provided additional liquidity of up to $75 million.
“The EMEA and Asia-Pacific business entered the current crisis in good financial health, and we have acted prudently throughout and, in some cases, have drawn on the support mechanisms made available by governments to mitigate the impact of the crisis and associated lockdown,” Vargo said. “The additional funding provided as part of this agreement will ensure that this business will emerge from the current crisis even stronger.”
Exide Technologies is a provider of stored electrical-energy solutions for the transportation and industrial markets.