Automotive aluminum diecaster J.L. French Automotive Castings Inc. is pursuing a prenegotiated restructuring under Chapter 11, and will file its reorganization plan and disclosure statement this week.
The Wisconsin-based company explained it has been impacted by “automotive production declines and industry-wide credit restriction.” It says the reorganization will provide a stable financial foundation by reducing its secured debt from approximately $280 million to approximately $65 million, using debt-for-equity swaps with first- and second-lien term loan lenders.
In its Chapter 11 filing, J.L. French states it will exchange more than $215 million in first- and second-lien term loan debt for substantially all of the equity in the company. First-lien lenders would receive 95% of the new J.L. French common stock. Second-lien lenders would receive 5% of the common stock.
The Chapter 11 filing covers J.L. French and its domestic affiliates, but not its foreign operations or joint venture.
This is the second bankruptcy reorganization for J.L. French. In 2006 it executed a similar pre-negotiated restructuring, also to reduce debt. By 2007 it was planning a capacity expansion, but early this year it began to scale back operations due to declining automotive demand.
For the current reorganization, reports it has agreed with some first-lien lenders for a $15 million debtor-in-possession (DIP) facility to fund working capital needs during the reorganization. This line of credit also will serve as the foundation for J.L. French’s exit financing.
“We are very pleased to have reached sufficient agreement with our lenders and customers to offer a Plan of Reorganization and Disclosure Statement very shortly,” stated
Thomas Musgrave, J.L. French chairman, president, and CEO, stated the company has a strong business model with distinct technological and quality advantages for its customers. “However, sales have dropped commensurate with the dramatic decline in the North American automotive production to the extent that we cannot service the existing debt structure,” according to Musgrave.
He said that by reducing its debt, the company will remove “the balance sheet barriers” that have prevented J.L. French from landing certain contracts, and will provide additional operating liquidity. Musgrave said the new financial structure will enhance customer and vendor confidence, and enable J.L. French to focus on consolidating its operations, R&D, new customer programs and other strategic initiatives.
“In fact our major customers support the proposed Chapter 11 plan,” Musgrave claimed. He said the reorganization will be completed in a few months, and the creditor protection period will be completed within 90 days.
Sheboygan, WI-based J.L. French produces aluminum diecastings for automotive parts, including oil pans, engine front covers, engine blocks, and transmission cases. It has two plants in Sheboygan, one in Glasgow, KY, and another in Ansola, Spain, and a joint venture in China.
J.L. French in Ch.11 to Preserve Operations, Reduce Debt
Second pre-negotiated bankruptcy for aluminum diecaster