Armstrong Cuts Access To DIP Line Again

  • 20 Oct 2002
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Armstrong World Industries has reduced the borrowing capacity under its debtor-in-possession facility for the third time in two years. The facility, which started as a $400 million revolver, is now down to a $75 million letter of credit facility. Because the new agreement eliminates the company's ability to borrow under the line, Armstrong will save substantially on fees, dropping its annual payments from $174,000 to $59,000 after paying $125,000 in fees for the changes. "This reduced facility is more than sufficient, and we are pleased with the resulting savings in related fees," said Leonard Campanaro, cfo.

In February 2001, the line was reduced for the first time to $300 million. Armstrong went back to bankruptcy court in May 2001 to reduce the facility further to $200 million. And now, after never tapping the line, Armstrong determined that it no longer needed access to the borrowing capacity, just the letter of credit feature. The bank group, which is led by J.P. Morgan, already has issued $24 million worth of guarantees on the company's behalf over the past two years.

The Lancaster, Pa., company did not file for bankruptcy in December 2000 because of operational problems, according to Deb Miller, spokeswoman. Rather, Armstrong was pushed into bankruptcy by asbestos settlements that cost the company as much as $40 million per quarter, draining almost all of its cash.

Since the filing, the company has increased its cash tenfold to more than $345 million because of halted asbestos liabilities and omitted stock dividend payments, despite declining profits and business downturns. Armstrong has not yet filed a restructuring plan to emerge from bankruptcy, although it presently is negotiating its reorganization with key creditors.

  • 20 Oct 2002

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