Exide Technologies, a former Fortune 1000 battery manufacturer based in Georgia and now squeezed by a growing debt load and the COVID-19 supply crunch, has filed for bankruptcy as it seeks to sell off remaining assets.
Exide is using Chapter 11 protection to stave off action by its creditors while it works out separate sales of both its growing international business and a flagging North American operation held down by low-margin plants, a high debt load and hundreds of millions of dollars of environmental remediation costs.
The Milton-based maker and recycler of lead-acid batteries reportedly revealed its $817 million debt load as it filed for its second bankruptcy of the decade, having emerged from the last restructuring just five years ago.
According to a May 19 filing in the U.S. Bankruptcy Court in the District of Delaware (PDF download), the company has secured $40 million loan facility to continue operating while seeking a buyer.
Meanwhile, existing bondholders aiming to buy Exide’s international assets have put up a binding starting bid of $430 million plus the assumption of certain debts and liabilities. The group has allocated up to $75 million to fund operations globally until the July 2020 deadline for bids and the anticipated closing in August.
Exide’s EMEA (Europe, Middle East and Africa) business works via a complex holding structure and includes a headquarters in Gennevilliers, France, and nine factories and three recycling facilities in places like Poland, Spain, Italy, Germany and Portugal. Its Asia operations mainly consist of distribution centers and sales offices in China, Singapore and Australia.
Global production been a bright spot for the company, which is saddled with ”legacy liabilities” in the U.S. reportedly including non-performing properties and hundreds of millions of dollars in environmental cleanup costs. Remediation for one former plant in California has already cost upward of $150 million.
“We have been steadily growing revenue and market share in EMEA and Asia-Pacific over the past few years,” said Chairman, President and CEO Tim Vargo in a news release. “As our lenders have learned more about this business, they were impressed by its growth trajectory, loyal customer base and talented employees. Their increased support reflects their confidence in our capability to deliver consistent growth and profitability by bringing to market innovative technologies for energy storage across each business segment to benefit our customers. We are pleased to have found a new owner that is committed to supporting the next phase of growth of our business in these regions.”
The past few years represent a steep fall for Exide, which was founded in 1888 and supplies batteries for cars, boats and golf carts, industrial motive power systems for forklifts, railways and other systems, as well as energy storage for networks that require uninterrupted supply, such as telecommunications systems, hospitals and data centers. The company last appeared on the Fortune 1000 list in 2015 with reported revenues of $2.85 billion.
The COVID-19 crisis “exacerbated and accelerated” the “liquidity and operational headwinds” of the last two years, hampering cash flow by shutting down plants in Europe and slowing operations in the U.S., according to declarations in the bankruptcy proceedings.
The company still has 8,000 workers around the globe, and the bankruptcy will send ripples to factory towns in Kansas, Indiana and in its former headquarters city of Reading, Pa., where Exide reportedly recycles some 17,500 tons of plastic annually for new battery housings. Exide moved its base to metro Atlanta a few years after acquiring GNB, a battery producer with roots in Australia, in 2000.
Employees at a Columbus, Ga., factory learned of the company’s struggles first hand in March 2019, when Exide abruptly said it would gradually close a plant there that made flat-plate batteries for industrial power systems, citing “weakened demand.”
Statements in the bankruptcy hearing revealed that the Columbus closure, which is still in process more than a year later, was part of an ongoing effort to “consolidate product lines and move away from mixed product manufacturing plants.”
It was also one of a few initial steps toward restructuring, which also included divesting of its branch network and cutting 800 jobs. The Columbus plant, which had 250 people at its peak, “was one reason for shrinking margins and was a drain on the company’s working capital.”
Learn more about the restructuring here.