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Exide Enters Into Backstop Agreement With Supporting Noteholders

January 08, 2015, 07:10 AM
Filed Under: Bankruptcy

Exide Technologies announced that certain holders of its senior secured notes (the "Backstop Parties") have executed a commitment to backstop (the "Backstop Commitment Agreement") up to $160 million of second lien convertible notes to be offered to certain senior secured noteholders pursuant to a rights offering under Exide's proposed plan of reorganization ("POR"). Holders of a majority of the principal amount of Exide's senior secured notes also entered into an amended and restated plan support agreement (the "Second Amended PSA") memorializing their support for the Company's proposed POR. 

The proposed POR contemplates de-leveraging the Company by approximately $600 million to provide for an "as converted" net leverage ratio of approximately 2.0 times. The POR also includes a rights offering to certain holders of senior secured notes (together with oversubscription rights) of up to $175 million in second lien convertible notes, which, as noted, is backstopped up to $160 million pursuant to the Backstop Commitment Agreement. The POR would allow Exide to emerge from Chapter 11 substantially in its current form – operating across all of its existing business segments. Proceeds from the rights offering, together with availability under a new exit revolving credit facility, are expected to provide the Company with estimated pro forma liquidity at exit of at least $225 million and be used to fund the Company's five-year business plan after emergence. This funding will provide the Company with liquidity and working capital to support its seasonality and business growth; capital improvements; and environmental, health and safety investments. The obligations of the Backstop Parties under the Backstop Commitment Agreement and the Second Amended PSA are subject to the Bankruptcy Court's approval and certain other conditions.

Should the proposed POR not be consummated, the Company has been informed by holders of a majority of its post-petition term loans that they intend to pursue an acquisition of all or substantially all of the Company's assets through an alternative credit bid transaction. Similar to the proposed POR, this transaction would result in $175 million of new money invested in the Company and the Company operating in its current form — across all of its existing business segments.

Concurrently, in the exercise of its fiduciary duties, Exide continues to pursue a sale process, soliciting third-party bids for a potential sale of some or all of its businesses. This dual-track approach ensures that the Company has explored all opportunities reasonably available to maximize estate value. Additionally, with the Backstop Commitment Agreement now executed, Exide and certain of the Backstop Parties intend to continue negotiations with representatives of the Official Committee of Unsecured Creditors concerning the treatment of unsecured creditor claims under the POR.

"Securing a commitment for the substantial new capital contemplated by the backstop agreement is a significant, positive development in our restructuring process. The new investment of capital will enable Exide to substantially invest in its facilities and new areas for growth. The backstop is a strong endorsement of the Exide business and going-forward plan by the Company's senior secured creditors," said Robert M. Caruso, President and Chief Executive Officer of Exide Technologies.

Exide will seek to have a motion heard by the Bankruptcy Court for approval of the Backstop Commitment Agreement and Second Amended PSA on January 20, 2015, or the next available date as the Bankruptcy Court will hear the matter. The Company intends to continue the hearing on the adequacy of its Disclosure Statement for its proposed POR, currently scheduled for January 12, 2015, to the date the Bankruptcy Court sets for hearing on the approval of the Backstop Commitment Agreement and Second Amended PSA. As part of this process, Exide intends to request a modification of its Debtor-in-Possession (DIP) Financing to address the January 15, 2015 disclosure statement approval deadline and anticipates that requisite DIP Financing lenders will consent to such modification. The Company's goal remains that its U.S. operations emerge from Chapter 11 restructuring by March 31, 2015.

Exide Technologies, with operations in more than 80 countries, is one of the world's largest producers and recyclers of lead-acid batteries.

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