COVID-19 Drives Battery Maker Exide Back Into Bankruptcy

By Jeff Montgomery
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Law360 (May 19, 2020, 10:47 AM EDT) -- Global battery maker and recycler Exide Technologies and four affiliates sought Chapter 11 protection in Delaware on Monday, carrying more than $817 million in secured debt and reporting plans for a sale of all assets through one or more transactions.

The filing marks the privately held company's second trip through the U.S Bankruptcy Court in Delaware since June 2013, when the Georgia-based company began a Chapter 11 reorganization that, when confirmed in June 2015, allowed the business to shed some $600 million in debt.

In a case-opening declaration, Chief Restructuring Officer Roy Messing cited "legacy debt" burdens from the prior Chapter 11, environmental cleanup costs that could run to $200 million over the next five years and the more-recent effects of the COVID-19 pandemic among the reasons for the company's return to bankruptcy after it had begun extensive out-of-court sale efforts.

"Cash receipts have been adversely affected due to lower consumer demand and customers attempting to conserve cash," Messing said of the pandemic's impact in the company's case-opening declaration. "Additionally, the company's supply chains have been impacted by plant shutdowns and government enforced lock-downs," with production slowed in America and fully shut down at some European sites.

Under the latest plan, the business already has lined up an agreement with an ad hoc creditor group to serve as a bidder-to-beat stalking horse for a sale of operations in Europe and the rest of the world, built around a $430 million debt takeback, or credit bid.

Separate efforts are under way to market and potentially auction the company's American operations as well, with a goal of closing the deal by Aug. 7. A tentative closing on the European and remaining assets has yet to be set. Remaining assets, including 23 "non-performing" pollution cleanup sites, will be liquidated or abandoned, the company said.

Talks have already begun with regulatory agencies and state and local governments aimed at settlements on future cleanup obligations, including for 16 locations in the U.S. and Canada that could require costly, long-term attention, according to the filing.

"At the end of these Chapter 11 cases, the debtors will not be in business, and as such, they will no longer be able to retain and support the ongoing maintenance and remediation" of non-performing properties, Messing said.

Meanwhile, a group of lenders, including some current noteholders, has agreed to provide $40 million in debtor-in-possession financing for the company's salvageable businesses. Blue Torch Finance LLC will provide $25 million, while a group of noteholders will provide the remaining $15 million.

"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," Tim Vargo, Exide's chairman, president and chief executive officer said in a separate company announcement.

Founded in 1888, the business is a major recycler of lead acid and lithium ion batteries, with production facilities and lead recycling centers in the U.S. and Europe.

The company's pre-petition secured debt includes a $101.2 million balance on an asset-based lending agreement administered by Bank of America; $152.5 million in 10.75%, super priority lien senior secured notes due next year; $390 million in 11%, priority secured notes due in 2024; and $161 million in 11%, senior security notes due the same year.

Prior to the Chapter 11 filing, the company organized an independent special committee to investigate a $150 million financing agreement reached in June 2019 as part of an effort to identify potential buyers or investors for the business, Messing said. The financing and a related "optimization" of Exide's corporate structure to support a possible merger or acquisition will be examined, with the work advised by Exide's counsel.

Exide Holdings Inc. and its affiliates are represented by Daniel J. DeFranceschi, Zachary I. Shapiro and Brendan J. Schlauch of Richards Layton & Finger PA and Ray C. Schrock, Jacqueline Marcus and Sunny Singh of Weil Gotshal & Manges LLP.

The case is In re Exide Holdings Inc. et al., case number 1:20-bk-11157, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Alyssa Miller.

Update: This story has been updated with more details from the filing.

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