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Law360 (April 13, 2020, 10:41 AM EDT) -- Pace Industries LLC, one of the nation's largest producers of die-cast and finished aluminum and other metal products, sought Chapter 11 protection in Delaware on Sunday, after an ongoing attempt to sell or reorganize was disrupted by the COVID-19 pandemic
Pace's Chief Financial Officer Craig Potter said in an opening declaration that the company and 10 affiliates plan a quick move through bankruptcy under a prepacked plan that will restructure some $324 million in debt, largely through a debt-for-equity swap.
The company, a major supplier to the auto industry, had been operating with nearly 2,600 salaried and full- and part-time workers but was forced to shut down five plants recently in the wake of supply disruptions caused by the COVID-19 emergency and stay-at-home orders. Employment has since fallen to 252 salaried and 478 hourly employees.
CEO Scott Bull said in a post-filing statement that the company had made substantial progress over the past two years in both cost-cutting and in expanded services for the auto sector.
"Unfortunately, we were not able to realize the full benefits of these new programs and initiatives before the coronavirus weakened demand, disrupted our supply chain and forced us to temporarily close many of our plants in the United States," Bull said.
Included in the company's present debt is about $92.1 million owed under an asset-based lending arrangement and $232.1 million in prepetition, senior secured notes.
Potter said the case would be financed through a $125 million debtor in possession loan and $50 million term loan. Plans call for holders of the $92.1 million in asset-based debt to be paid in full, with noteholders receiving proportional shares of new equity and a new junior term loan.
Noteholder recoveries were estimated at 60% to 70% under the proposed plan. Existing equity holders and those with securities claims, however, are not expected to receive any plant payments.
Pace reported that it expects all trade creditors, employees, sales agents and unsecured creditors to be paid in full and on time. At the time of the filing, the company reported owing about $13.5 million on leases for machiner and other capital equipment and about $62 million in trade debt.
FTI Consulting serves as chief restructuring officer and financial adviser to PACE. The company is aiming for a combined hearing on its plan and disclosure statement on May 21, with the company anticipating an emergence from Chapter 11 in the current quarter.
Affiliates operating in Mexico will be unaffected by the proceedings.
The business, founded in 1970 at a single plant in Arkansas, is now North America's only fully integrated die-casting supplier, among other businesses, with nine die-casting plants, two tool and die plants, and two paint and finishing centers. Its plants make aluminum, zinc and magnesium die-cast and finished products for motor vehicles, industrial motors and the power sports, lawn and garden, appliance lighting and tool industries, among others.
Holders of Pace's senior secured noteholders are represented by Schulte Roth & Zabel LLP, while revolving credit facility lenders are represented by McGuireWoods LLP and Conway MacKenzie.
The case was assigned to U.S. Bankruptcy Judge Mary F. Walrath.
Pace Industries LLC and its affiliates are represented by Robert S. Brady, Edmon L. Morton and Joseph M. Mulvihill of Young Conaway Stargatt & Taylor LLP and Matthew A. Feldman, Rachel C. Strickland and Debra M. Sinclair of Willkie Farr & Gallagher LLP.
Pace Industries' finance counsel team includes Katie Coleman, Chris Gartman, Anson Frelinghuysen, Steve Greene, Chuck Samuelson, M. Shams Billah, Jeff Margolin, Christopher Whelan, Samuel Hurt, Nathalie Rey, Nick Velonis and Nitzan Weizmann of Hughes Hubbard & Reed LLP.
The case is In re Pace Industries et al., case number 1:20-bk-10927, in the U.S. Bankruptcy Court for the District of Delaware.
Updated: This story contains additional counsel information for Pace Industries
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