Exide clears path to primary market with new holdco, potential asset sales

Exide Technologies’ newly formed holding company and potential asset sales could streamline the company’s path back to the capital markets, according to two sources familiar with the matter. The lead recycler and auto parts maker has debt resulting from its 2014 bankruptcy that starts to come due as soon as next year.

As part of a corporate overhaul, Exide created a new holding company that will reorganize the company into two subsidiaries – North America and Rest-of-World – according to management comments on Monday’s 3Q20 investor call, the sources said. That will clean up its corporate structure so the borrower can more readily return to the capital markets at some point in the future, they added.

Exide equitized a portion of its capital structure during its 3Q20 period ending 31 December – the USD 290m 7.25% PIK 1.5 lien notes due 2027 – a move management touted as a major win for the company as it seeks to deleverage, the sources said.

But the borrower could seek to refinance some of the remaining tranches of expensive debt or top off its liquidity position in the capital markets. Exide’s capital structure consists of a USD 150m 4.5% PIK/10.75% cash super-priority note due 2021, a USD 375m 11% PIK/3% cash exchange priority note due 2024, and a USD 159m 11% PIK/3% cash first lien note due 2024.

As of 31 December, Exide’s liquidity totaled USD 88m through USD 32m of cash and USD 56m of revolver availability. Pro forma the 2027 notes’ conversion, leverage shrinks to 7.3x from 9.7x at 2Q20, based on USD 124.7m of LTM EBITDA and USD 910m of pro forma total debt.

In addition, Exide is working to sell 22 parcels of land consisting of closed manufacturing sites, excluding the European, Rest-of-World and California regions. The sales are expected to reduce liabilities for the company, instead of providing cash proceeds, the sources said.

When the company filed for Chapter 11 in 2014, it faced environmental contamination violations and claims from the Environmental Protection Agency, causing trading levels to bottom at the time.

Commenting on the company’s quarterly earnings results, management said they expected the European auto and industrial segments to be weak and don’t see improvement in the near term due to the global economic slowdown and a warmer winter, the sources said.

Management also assured investors that the coronavirus has made no material impact on its operations thus far, but the company is taking cautionary steps in China and Italy, the sources added.

The company did not provide a material update to the previously announced sale of the European segment, representing more than 60% of the company’s business, the sources said.

Exide did not respond to a request for comment.

2020 Debtwire

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