J.L. French Declares Bankruptcy

Feb. 13, 2006
Pre-arranged agreement with creditors may speed reorganization

Aluminum diecaster J.L. French has declared a voluntary bankruptcy. The move to seek Chapter 11 creditor protection was made in a coordinated effort with the Sheboygan, WI, company's lenders as a way to restructure its debt and create new opportunity for up to up to $130 million in new equity.

J.L. French Automotive Castings designs and manufactures diecast aluminum automotive parts, including oil pans, engine front covers, engine blocks, and transmission cases.

As of December 31, 2005, J.L. French reports it had approximately $465 million in first- and second-lien senior secured debt, and $28.9 million in 11.5% senior subordinated unsecured notes due 2009. Most of this debt is attributed to an expansion/acquisition program in the late 1990s, and the company's 2005 revenues were approximately $500 million.

J.L. French said the agreement with its debtholders includes plans to repay in full approximately $295 million in first-lien debt, and conversion of $170 million in second-lien debt into equity and warrants. The company says this will allow J.L. French to reduce its overall debt by approximately $300 million and remove $200 million in preferred securities from its balance sheet.

These moves will allow J.L. French to increase investment in its core business after restructuring, it states. The prearranged agreement with creditors is the basis of J.L. French's prediction that it can complete its Chapter 11 reorganization bylate in the second quarter of 2006.

J.L. French plants in Sheboygan. Glasgow, KY, and Etxebarria, Spain, will continue to operate as usual. The Spanish operation is not included in the U.S. bankruptcy filing, though the company's British subsidiary also has filed for creditor protection.

Several "underperforming" operations will be closed. These are in Benton Harbor, MI, and Saltillo, Mexico. Administrators in Great Britain will determine the future of the plants at Witham, England, and Presteigne, Wales.

In addition to the agreement with its lenders, J.L. French has obtained a commitment of up to $50 million in debtor-in-possession (DIP) financing from General Electric Capital Corp., to which the senior secured lenders have consented. Once approved by the bankruptcy court administrator, the company will use the DIP financing as working capital during the Chapter 11 case.

J.L. French emphasized it intends to pay employees, trade vendors, suppliers, and service providers of its U.S. operations in the ordinary course of business, and will seek Court authority to do so.

Jack F. Falcon, J.L. French chairman, CEO and president, stated: "We are pleased to have reached agreement with the majority of our creditors to bring the company's debt level in line with cash flows and create a strong financial foundation for our future business. The demonstrable support of our creditors affirms that J.L. French will continue to play a leading role in high-pressure die-casting in the automotive industry. Our recovery will be rapid and successful. In fact, we have already obtained commitments for new business from our major customers."