Loan investors are eyeing Exide Technologies' $550 million credit that will finance the auto battery maker when it emerges from bankruptcy. The deal offers a healthy spread, but some investors are wary due to the past problems the company has experienced. "I am really not sure how the market is going to react. It's Exide. But given the lack of assets in the marketplace, this could be one where they say the balance sheet has been cleaned up," said one loan investor interested in the deal.
Deutsche Bank and Credit Suisse First Boston are leading the financing package, which hit the market last week. The credit is split into a U.S. $150 million term loan, a E150 million term loan, and a $150 million foreign term loan. All three tranches have a six-year tenor and pricing is LIBOR plus 4%. There is also a $100 million, five-year revolver priced at LIBOR plus 4%. The credit is rated BB-/Ba3. Exide's pre-bankruptcy debt was being bid north of 70 last week, according to traders. The company went into bankruptcy in April of last year after suffering operating losses, cash flow constraints and continued weakness in the company's business markets (LMW, 3/02).
Matthew Kleiman, a partner at Kirkland & Ellis and an attorney for Exide, responded to concerns by drawing a line between the debt-laden Exide of the past and now. "The past history is in the past," he said. "Upon emergence Exide will have taken deliberate steps to rationalize both operations and its capital structure. It will be in a stronger and more competitive position, prior to the commencement of the bankruptcy," he said. "Exide has used the tools of bankruptcy to consolidate operations, to relieve themselves of burdensome contracts and leases and to maximize profitability," he added, noting that approximately $1.3 billion of debt will be coming off the balance sheet. Under the terms of the plan of reorganization, substantially all of the companies' debt will be converted to equity. A CSFB banker referred questions to Deutsche Bank officials, who did not return calls.