In 1997, Roger G. Pollazzi engineered a massive restructuring that brought automotive metal supplier Harvard Industries Inc. out of bankruptcy. Now his team is about to take on another rescue effort, this time leading Harvard as it buys ailing air-bag maker Breed Technologies Inc. to bring it out of Chapter 11.
Together, the companies will make metal auto parts — through Harvard — and Breed's plastics-intensive air-bag systems, steering wheels and seat belts, with combined sales of $1.7 billion.
Harvard, with the support of Breed's board of directors and its senior secured bank group, announced June 13 it has filed paperwork with the U.S. Bankruptcy Court for a purchase deal worth more than $600 million, including $300 million in Breed debt.
The deal should wrap up this fall. Secured creditors would receive $220 million in cash and notes and 45 percent of the shares in a combined Harvard and Breed.
Lakeland, Fla.-based Breed entered Chapter 11 in September, listing total debt of $1.6 billion.
If the deal goes through, Lebanon, N.J.-based Harvard will buy Breed for about a quarter of its market value, if the company is healthy, said analyst Scott Upham, president of Providata Automotive of Ann Arbor, Mich.
But Harvard and its Chief Executive Officer Pollazzi are a strong team to bring Breed back to financial security, Upham said.
Harvard had posted a loss of $389 million on sales of $810 million when it entered bankruptcy in May 1997, with total debt of $624 million.
Harvard, a maker of such auto parts as door frames and sliding door tracks, hired Pollazzi in November 1997. He began a restructuring plan that included closing its plastics molder, Harman Industries Inc. in Bolivar, Tenn.
Harvard emerged from Chapter 11 a year after Pollazzi and his team took control.
"When [Harvard] entered bankruptcy, they did the right thing, brought in experts who had experience in resurrecting companies from the dead," Upham said. "They brought it back and Harvard is going gang busters now."
Harvard still has not recorded a net profit since its Chapter 11 turnaround, listing $7.2 million in losses for the first quarter of 2000, but that is an improvement from first quarter losses of $14.1 million in 1999.
The business has no experience in safety systems, but with Breed it buys a complete module program — with engineers, global facilities and customers.
And Harvard takes it over without the extensive debt load that sent Breed into Chapter 11.
Breed posted $1.38 billion in total sales and had 16,000 workers in 42 plants worldwide. But it was not making money, with $234.7 million in losses posted through its first three quarters of its 1998-99 fiscal year.
"Breed Technologies is just the acquisition we have been looking for," Pollazzi said in a written statement.
New York-based Standard & Poor's has placed Harvard on its CreditWatch with "negative implications." It lists Harvard's corporate credit rating as B-plus.
"The deal, if completed, will increase Harvard's debt leverage and financial risk, as Harvard is currently debt free," S&P analysts said.
The firm did take note that the purchase, while increasing financial risk, will improve Harvard's product line and geographic diversity.
Current Breed Chairwoman and CEO Johnnie Cordell Breed and Ernie Green, the chairman and CEO of Dayton, Ohio-based EGI Corp., meanwhile, announced they have withdrawn their $328 million offer for Breed.
The two hoped to bring it out of Chapter 11 and operate Breed as a minority business enterprise.
The pair is ready to step back in, though, if Harvard's deal falls through, Green said in a press release.