(March 22, 2004) — Milacron Inc. lives to fight another day, thanks to its eleventh-hour deal to refinance its debt by issuing new bonds convertible to stock. Obviously, the fight remains tough, and Milacron still faces another big bond payment due in April 2005.
Despite the challenges, now is a time to celebrate for all “stakeholders” in the Cincinnati-based machinery maker: the employees, customers and suppliers whose outlook had been clouded with uncertainty as the March 15 deadline neared.
Milacron now has some breathing room before it has to pay the 2005 bonds, which total 115 million euros — currently about $140 million. That debt is hanging over the company's head, but an improving U.S. manufacturing economy should make it easier to refinance those bonds.
Ronald Brown and other top executives deserve credit for keeping Milacron afloat during the past three-plus years, certainly among the most depressed periods in history for selling plastics machinery in the United States. Milacron has lost more than $450 million since 2001.
But now the single-darkest day is past. Late in the afternoon March 12, Milacron announced a refinancing packaging that pays off $115 million in bonds that were coming due March 15. The company also got a new credit deal for $140 million to refinance its revolving line of credit and its sale-of-receivables credit agreement.
Behind the financial terminology is a stark fact: In the weeks before the refinancing news, financial analysts were listing Chapter 11 reorganization as one possible option.
Brown, the chairman and chief executive officer, didn't help matters by steadfastly refusing to answer questions about the company's strategy during such a critical time. His lips were sealed, so speculation filled the void.
Milacron. A solid American industrial name. Founded in 1884. Bankrupt? That would be the plastics industry's equivalent of a bankruptcy by General Motors Corp.
It's an ugly thought, one that sent shudders through even some of Milacron's toughest competitors. Milacron is a bellwether for plastics machinery, since it makes so many different types — injection presses, blow molding machines, extruders, mold components and structural foam molding equipment.
We've said it before: Milacron's continued existence and its financial health are important to the U.S. plastics industry. As the largest U.S.-owned plastics machinery maker, Milacron needs to stay strong and be a leading innovator. Last week, the company resurrected the “Cincinnati Milacron” name for all injection presses built in its factory in Batavia, Ohio — a good move.
The refinancing drama was a black cloud. Certainly, worker morale was affected. Milacron probably lost some orders by customers worried about its viability.
Now the cloud has lifted. Two new bondholders bought in for $100 million in convertible bonds. That means, at a future date, the bonds could be converted to new Milacron stock — and the new investors would end up owning 40-60 percent of the company. The big equity stake was a sweetener, necessary to get the deal done.
Financial maneuvers kept Milacron alive. But the real key is the men and women who work at Milacron. Their hard work and dedication to quality will make the company strong.