Auto industry supplier Metaldyne Corporation and US subsidiaries have filed for Chapter 11 bankruptcy to address liquidity needs and facilitate a restructuring, the company said.
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The filing in bankruptcy court for the southern district of New York did not include the company’s non-US entities or operations or parent company Asahi Tec Corporation.
Metaldyne said it had entered into two non-binding letters of intent to sell a majority of its assets as going concerns under a court supervised sale process under the US bankruptcy code.
Private equity firms RHJ International and the Carlyle Group have separately submitted letters of intent to purchase different portions of Metaldyne assets.
RHJI has a majority stake in Asahi Tec.
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By GlobalData“Metaldyne believes that the decision of RHJI and Carlyle to step in and submit bids for the majority of the company’s assets is a vote of confidence in its business and its employees,” the supplier said in a statement.
Metaldyne said Asahi Tec would now focus on its Japanese businesses and would no longer continue economic support for Metaldyne.
“We are grateful for the support Asahi Tec has provided since it purchased Metaldyne in 2007, particularly in connection with how Asahi Tec helped us to eliminate approximately US$400m of debt from our balance sheet,” said Metaldyne chairman, president and CEO Thomas Amato.
Metaldyne was highly leveraged before being acquired by Asahi Tec. Since the acquisition, Asahi Tec has contributed to the significant deleveraging of Metaldyne, from its original debt of just under $1bn to long term debt today of less than $600m.
“Unfortunately, despite this significant debt reduction, the impact from the macroeconomic environment of declining industry volumes, a tight credit market and the uncertainty in the marketplace were simply too large to overcome without a broader in court restructuring,” Amato said.
RHJI plans to buy some North American and European assets of Metaldyne’s sintered products, vibration control products and powertrain products business units, as well as the European forging products business unit.
The RHJI transaction would provide up to $25m in cash; the issuance of a new $50m term note by the newly formed entity; the rollover of an existing demand note of approximately $20m owed by Metaldyne’s German subsidiary to RHJI and the assumption of certain inter company obligations relating to that note, and the assumption of certain other liabilities.
RHJI has also agreed to inject additional cash into the newly formed entity that will acquire the Metaldyne assets to help ensure that it can meet its short term liquidity needs.
Carlyle plans to buy some Metaldyne chassis business assets in the United States, Mexico and Spain.
Under the bankruptcy sale process, the proposed transactions are subject to execution of definitive purchase agreements, court approval and other usual conditions and interested parties will have an opportunity to submit higher and better offers for Metaldyne’s assets.
Metaldyne said it was seeking other potential buyers for assets not included in the letters of intent and would continue to work with customers on other alternatives.
“Selling operations on a going concern basis is the best way to preserve as many jobs as possible, best serve our customers and will allow certain of our operations to emerge from bankruptcy in a matter of months,” said Amato. “The operations we are selling have strong product portfolios, advanced technologies and continue to perform well operationally.”
Metaldyne said the decision to file under Chapter 11 came despite extensive restructuring initiatives over the last 17 months, including significant cost reductions with an annual value of $100m and the completion of a bond tender offer which contributed to the deleveraging of Metaldyne.
Metaldyne has secured an $18.5m debtor in possession (DIP) financing facility that will be provided by Deutsche Bank, New York, and funded through economic participations purchased by some Metaldyne customers. Lenders under Metaldyne’s existing revolving credit facility have consented to the DIP facility. Subject to court approval, the DIP credit facility will be used for the company’s normal working capital requirements.
