Struggling battery maker Exide Technologies Inc. (NASDAQ:XIDE) has filed for Chapter 11 bankruptcy protection on Monday. The battery company had $31 million in interest payments in August and almost $52 million in convertible notes due in September.
How Bankruptcy Will Help Exide
Exide Technologies Inc. (NASDAQ:XIDE) filed for the Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Delaware. Chief Financial Officer Phillip A. Damaska reported in the filing that the filing will help to “implement a restructuring that would result in a de-levered balance sheet and a sustainable capital structure.”
The Milton based firm has also arranged for a $500 million bankruptcy loan from J.P. Morgan Chase & Co (NYSE:JPM) to fund its restructuring. The battery company earlier filed for Chapter 11 protection in 2004.
The battery firm has been losing profits and market share due to high production costs, slow economy and intense competition primarily from Johnson Controls Inc (NYSE:JCI).
In the filing, the company also mentioned that it suffered a loss of about $160 million in annual revenue owing to Wal-Mart Stores Inc.’s decision to name Johnson Controls as its sole supplier of transportation batteries in 2010. As per the company, apart from revenues, “Exide also lost an important and reliable source of battery cores under a captive-core arrangement with Wal-Mart.”
Exide Technologies Inc. (NASDAQ:XIDE) is facing problems at its California lead-recycling facility which provides a “significant portion” of its domestic lead. The company has to close its Vernon, Calif., plant in April, after an order from the California Department of Toxic Substances Control that claimed the factory’s storm-water system fails to meet state regulations. The company expects that the close of the plant will result in a loss of 24 million in projected earnings before interest, taxes, depreciation and amortization.
The battery company also stated in the filing that Europe is witnessing a prolonged economic downturn, which is impacting around 51 percent of the company’s worldwide revenue.
Exide Technologies Inc. (NASDAQ:XIDE), whose clients include auto makers, parts suppliers and retailers, produces batteries under the brand name Exide and NorthStar for vehicles and other machines. In the bankruptcy filing, the company mentioned that it has about 10,000 employees in more than 80 countries, and has assets of around $1.9 billion and debts of $1.1 billion.
The company also mentioned that the Chapter 11 filing is only for the U.S. parent firm while the international operations are excluded.