Exide Technologies Inc has produced its Chapter 11 bankruptcy exit plan that spells how it plans to be clear of its burden by March 2015. It needs $175m in new investment as well as complicated debt for equity swaps with major lenders but much hinges on the troubled Vernon California plant.
This has already cost Exide $69m since April and could cost another $98m more over the next few years if Vernon is allowed to re-open. No calculation is given as to what it would cost to get lead from elsewhere.
What happens to Vernon, an important source of raw materials, is a central issue in the company’s emergence from Chapter 11 according to court papers. Exide really needs a buyer but if one cannot be found, it is prepared to cement a deal with senior lenders that will reshape the balance sheet.
Exide has spent $3.5m since April 1 to respond to a Department of Justice investigation involving Vernon, as well as $4m to assure regulators of the company’s ability to address contamination caused by the Vernon plant. Then there was the cost of buying lead elsewhere and other expenditures that Exide hopes will be a one-time-only affair, according to court papers.
The Vernon plant has been shut down or had its operations suspended for much of Exide’s stay in bankruptcy, which began in June 2013.
The filing, which comes ahead of a court hearing where Exide will seek approval of a deal with California toxic substance regulators involving the Vernon plant, also sets out what the plant means to Exide’s financial future.
To re-open the Vernon plant in March 2015, and to obtain a permit to keep it open, the company projects it will spend some $98.6m over the next approximately dozen years. Most of that, $50m, comes after 2020. The spending includes $11m in cleanup funds in the area surrounding the plant, as well as $35m in corrective action, according to calculations that assume the settlement will be approved.
The City of Los Angeles has asked for more time to review the settlement with California’s Department of Toxic Substances Control, but Exide said says delaying a planned Thursday hearing is not warranted.
There is still uncertainty about the cost of keeping Vernon open or closing it down, because regulators could accelerate the funding requirements if Exide fails to get a permit to keep the plant open, the company warned.
However, losing Vernon means a certain drag on earnings, court papers say.
Exide filed for bankruptcy protection with about $1 billion in funded debt, including $675m in secured bonds. In addition to financial backers, trade vendors owed more than $100m are awaiting payment from the bankruptcy.
The Chapter 11 plan is designed to erase about $600m worth of debt and take Exide out of bankruptcy by March 31, 2015, court papers say.