Automotive News World Congress. January, 2006. 4. Financing Strategy ... Good News Visibility of auto sector troubles have brought availability of high ...
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Slide 1:Finding Finance Strategies – and Tactics – That Work
The creative avenues distressed companies are using to meet their financing needs in this market David L. Treadwell Chief Operating Officer EaglePicher Incorporated
Slide 2:EaglePicher Incorporated
Seven (7) Operating Divisions With Total Revenues of $662mm Divisions Include: Hillsdale Automotive $285mm Wolverine Automotive $105mm Filtration & Minerals $ 90mm Government Power $130mm Distributed Batteries $ 12mm Medical Batteries $ 3mm Pharma $ 11mm Boron $ 26mm
Slide 3:EaglePicher Incorporated
Filed for Chapter 11 Bankruptcy in April, 2005 Primary Reasons: Hillsdale division operating performance went from $40mm to $3mm over two year period Invested over $50mm in JV’s with $0 return Tech group operating performance significantly off – over three businesses.
Slide 4:Financing Strategy
First – Get credibility in the numbers Data is always bad Financial advisory firms Second – Plan to stop the bleeding, fix operations and execute Quick action with firm, consistent direction Involvement of customers Third –Develop a plan to return the business to health and execute
Slide 5:Financing Strategy
Throughout – Build credibility with employees, customers, vendors and financial participants Traditional lending sources not likely to be much help Good News – Visibility of auto sector troubles have brought availability of high risk debt to our market Bad News – Objectives are not always in line with creating long term value and “high risk” is “high yield” Find source that has incentives aligned with company
Slide 6:What’s Worked
EaglePicher Incorporated Situation: Financial numbers suspect, business process nonexistent, several divisions had significant operations problems, wide variances in capabilities. Solution: Accurate numbers, operations stabilized, implementing operational plan to return business to health. Bondholders funded $50mm third lien (PIK) debt and supported a first/second lien package of $295mm. Convertible to exit financing upon emergence. This replaced all existing financing. Result: EPI is financially solid pending emergence. We can commit to a solid growth plan with our employees and customers. All supported by the foundation of operational excellence.
Slide 7:What’s Worked
Oxford Automotive Situation: Weeks from running out of cash, needed months to complete $100mm transaction. Solution: Beneficiaries of potential transaction were the existing bondholders. They funded a $100mm loan, convertible to DIP financing upon filing. This allowed the company to complete the transaction and file an orderly, pre-packaged bankruptcy Result: No shipments missed. Oxford exited bankruptcy in four months, optimized value for impaired party.
Plenty of funding available – for a price Make sure you understand the entire price – are they going to support the plan or just looking to the assets? Keep your priorities in order. Get a quick handle on the actual situation Delay will kill you – be realistic, ask for help Financial numbers are always suspect Focus on fixing operations Build credibility Look to the sources with a vested interest in your success