Meridian Technologies Inc. has agreed with its lenders on a restructuring plan, and filed for creditor protection under Canada’s Companies’ Creditors Arrangement Act (CCAA). A new company is being formed, with a new capital structure and “significantly lower debt burden,” Meridan stated in a release.
The CCCA application covers only Meridian’s Canadian and U.K. operations. Meridian has seven manufacturing worldwide, two in Strathroy, ON, and one each in Eaton Rapids, MI; Verres, Italy; Sutton-in-Ashfield, England; and Shanghai and Chongqing , China.
Ontario-based Meridian claims to be the automotive industry’s largest supplier of high-pressure magnesium diecastings, with products like instrument panels, cross beams, transfer cases, and steering column supports. Among its customers are General Motors, Ford, Chrysler, Fiat, Opel, Volkswagen, LandRover, and BMW.
The company’s chief restructuring officer explained that refinancing and reorganization is necessary “to overcome the current industry conditions that have hampered our ability to achieve sustainable profitability, including increasing magnesium costs, declining OEM production volumes and a weakened U.S. dollar.”
Meridian’s secured lenders, principally GE Commercial Finance, agreed to provide the new organization with $53.4 million (C$55 million) in new financing, including a $29.1 million (C$30 million) revolving credit facility and a $24.3 (C$25 million) term loan upon closing. The lenders will exchange a significant portion of the group’s existing debt for all of the equity in the new organization — Meridian Lightweight Technologies.
During the CCAA process, Meridian’s lenders have arranged $19.4 million (C$20 million) in interim financing. The plan will effectively transfer ownership of the Meridian’s assets, including the equity of its subsidiaries, to the new Meridian Lightweight Technologies.
The company explains that the CCAA process is necessary only “to effectuate the restructuring,” meaning that all of Meridian’s facilities around the world will continue to operate as usual. Meridian said it does not plan a Chapter 11 filing in the U.S., or other bankruptcy proceedings anywhere else in the world that it has operations.
“This agreement is excellent news for our company, our employees, and our suppliers and customers worldwide because it means that the cloud of uncertainty that has created doubts about our long-term viability has been swept away,” stated chief restructuring officer Robert M. Caruso. “We are extremely pleased that going forward we will have the support of an owner with resources necessary to successfully operate our business.”
Formerly a joint venture of Teksid SpA and Norsk Hydro ASA, Meridian Technologies was acquired by Swiss investor Jostein Eikeland in December 2006.
Eikeland also holds a stake in the Swedish magnesium diecaster Tonsberg Magnesium Group Intl., which operates plants in Mexico, Poland, and Germany. Metal Bulletin reported last month that TMG had filed for bankruptcy, citing a former board member as a source.
Soaring prices for, and unreliable supplies of, primary magnesium were cited in that report. Chinese producers supply nearly 90% of the world’s primary magnesium.