April 6, 2007 — A federal bankruptcy court in Birmingham approved Citation Corp.'s plan to recapitalize its debt, clearing the way for the metalcasting group to rebuild its financial base, a strategy it says includes investment in "core business segments."
The ruling followed the filing by 25 days, one result of the fact that Citation had secured the endorsement for its recapitalization plan from a majority of its debtholders.
Citation's proposal is to convert $160 million of its approximately $190-million term debt to 100% of the group's common equity; the remaining $30 million in debt will be converted into PIK (payable in kind) debt maturing in 2013. Interest on the PIK debt will not be paid in cash, but rather accrues and is paid when the debt finally matures.
Citation's existing, asset-based revolving line of credit will continue under its current terms, and its current shareholders (preferred and common) will receive warrants in the new company.
Citation stresses that it will not seek concessions from customers and that it intends to continue paying suppliers on normal terms.
The plan "gives Citation a strong balance sheet and the flexibility needed to meet our corporate goals," stated president and CEO Ed Buker. "The speed with which we completed our recapitalization reflects the support we have from our investors and lenders and their belief in our strategic direction."
It is the second trip to bankruptcy court in less than three years for Citation, which reorganized under Chapter 11 in 2005. The company points out that over the past two years it has reduced internal costs significantly, won new business in various market segments, and divested and closed non-core operations.
Citation designs and manufactures cast and machined components for automotive, heavy truck, construction, agricultural, and commercial industrial markets.