Finding Finance Strategies – and Tactics – That Work The creative avenues distressed companies...

Finding Finance Strategies – and Tactics – That Work

The creative avenues distressed companies are using to meet their financing needs in

this market

David L. TreadwellChief Operating Officer

EaglePicher Incorporated

Automotive News World CongressJanuary, 2006

2

EaglePicher IncorporatedSeven (7) Operating Divisions With Total

Revenues of $662mm– Divisions Include:

• Hillsdale Automotive $285mm• Wolverine Automotive $105mm• Filtration & Minerals $ 90mm• Government Power $130mm• Distributed Batteries $ 12mm• Medical Batteries $ 3mm• Pharma $ 11mm• Boron $ 26mm


3

EaglePicher Incorporated

• Filed for Chapter 11 Bankruptcy in April, 2005

• Primary Reasons:– Hillsdale division operating performance went

from $40mm to $3mm over two year period– Invested over $50mm in JV’s with $0 return– Tech group operating performance

significantly off – over three businesses.


4

Financing Strategy

• First – Get credibility in the numbers– Data is always bad– Financial advisory firms

• Second – Plan to stop the bleeding, fix operations and execute– Quick action with firm, consistent direction– Involvement of customers

• Third –Develop a plan to return the business to health and execute


5

Financing Strategy• Throughout – Build credibility with employees,

customers, vendors and financial participants• Traditional lending sources not likely to be much

help• Good News – Visibility of auto sector troubles have

brought availability of high risk debt to our market• Bad News – Objectives are not always in line with

creating long term value and “high risk” is “high yield”

• Find source that has incentives aligned with company


6

What’s Worked• EaglePicher Incorporated

– Situation: Financial numbers suspect, business process nonexistent, several divisions had significant operations problems, wide variances in capabilities.

– Solution: Accurate numbers, operations stabilized, implementing operational plan to return business to health. Bondholders funded $50mm third lien (PIK) debt and supported a first/second lien package of $295mm. Convertible to exit financing upon emergence. This replaced all existing financing.

– Result: EPI is financially solid pending emergence. We can commit to a solid growth plan with our employees and customers.

All supported by the foundation of operational excellence.


7

What’s Worked

• Oxford Automotive– Situation: Weeks from running out of cash,

needed months to complete $100mm transaction.– Solution: Beneficiaries of potential transaction

were the existing bondholders. They funded a $100mm loan, convertible to DIP financing upon filing. This allowed the company to complete the transaction and file an orderly, pre-packaged bankruptcy

– Result: No shipments missed. Oxford exited bankruptcy in four months, optimized value for impaired party.


8

Conclusion• Plenty of funding available – for a price

– Make sure you understand the entire price – are they going to support the plan or just looking to the assets? Keep your priorities in order.

• Get a quick handle on the actual situation– Delay will kill you – be realistic, ask for help– Financial numbers are always suspect

• Focus on fixing operations• Build credibility• Look to the sources with a vested interest

in your success

Finding Finance Strategies – and Tactics – That Work The creative avenues distressed companies...

Documents

Transcript of Finding Finance Strategies – and Tactics – That Work The creative avenues distressed companies...