Battery maker Exide Technologies Inc. is ready to emerge from bankruptcy after a two-year term under Chapter 11 protection, swapping the bulk of its debt for shares in the revamped company.
The Princeton, N.J-based firm won approval April 16 for its reorganization plan, clearing the way for Exide to resume normal business operations.
``I am more confident than ever that ... Exide will be an even more formidable global competitor,'' Craig Muhlhauser, president, chief executive officer and chairman, said in a news release.
Exide, which injection molds battery cases and covers in Lampeter, Pa., filed in April 2002 for protection from creditors in U.S. Bankruptcy Court in Wilmington, Del. At that time, the firm had $1.5 billion in long-term debt racked up through a series of acquisitions. The company listed $2.4 billion in 2003 sales.
The reorganization calls for the firm's senior lenders to split shares worth 90 percent of a new Exide, with unsecured creditors splitting 10 percent of the stock value. Previous stockholders receive nothing.
The company still will have $540 million in debt, but the plan eliminates another $1.3 billion through the stock offering.
Credit analysts with Standard & Poor's assigned a BB- rating to the new Exide, with a stable outlook. The business continues to operate in a tough industry, noted analyst Martin King.
``The ratings also incorporate execution risks associated with Exide's complex restructuring program and the company's need to re-establish its reputation in North America following several years of turmoil,'' he said in an April 21 report.
``These factors more than offset Exide's business strengths, which include its high market penetration in certain segments, fair geographic and customer diversity and broad product line within the battery industry.''
The firm has improved its operations during its time in Chapter 11, King said, consolidating some operations, reducing employment and improving profitability.
Exide claims to hold 25-30 percent of the North American transportation battery market, which is strong, but Exide trails North American leader Johnson Controls Inc. with 40 percent.
``Exide's leading market shares and good customer and geographic diversity should limit downside risk,'' King said. ``Upside potential is limited by ongoing restructuring challenges, tough competition and a soft demand and pricing environment in some markets.''