MILTON, Ga. – The late April shutdown of battery maker Exide Technologies’ main lead recycling plant in California has this week pushed the company into bankruptcy to reorganize.
The company filed for bankruptcy protection June 10 in U.S. Bankruptcy Court in Delaware, on the heels of an April 24 order shuttering its lead recycling plant in Vernon, Calif.
“Our company has been burdened by a highly leveraged balance sheet which has limited our ability to competitively invest in our businesses,” president and CEO James Bolch said in announcing the bankruptcy. “Recently, our profitability has been impacted by unprecedented increases in our product costs - driven primarily by the market price of scrap lead in North America – as well as operational challenges in the U.S. and Europe which we have been unable to fully offset. After a great deal of consideration, we concluded a restructuring of our balance sheet and our operations was the best path forward for the company.”
California’s Department of Toxic Substance Control (DTSC), a division of the state Environmental Protection Agency, shut down Exide’s plant in Vernon in April, finding the company was “continuously releasing hazardous waste into the soil” around the recycling plant. DTSC’s shutdown followed a report by the South Coast Air Quality Management District (SCAQMD) that said Exide was also exceeding airborne emissions limits.
“Recent reports submitted by the facility to DTSC show that the plant’s underground hazardous waste-degraded pipelines are out of compliance with California's stringent hazardous waste requirements, are releasing toxic metal-bearing water and pose a risk to the environment,” DTSC said in announcing the shutdown. DTSC’s order would remain in effect until Exide could prove it could operate without posing a significant health risk and to stop the ongoing release of hazardous waste in the pipelines. In the bankruptcy petition, Exide denied the DTSC allegations.
The day after the DTSC order, Exide announced it was “evaluating its legal and regulatory remedies,” noting, “the Vernon facility provides a significant portion of the company's domestic lead requirements.” The company said it was looking for other lead suppliers on the open market and seeking to negotiate agreements with third-party lead recyclers to provide some or all of the internal lead requirements that would have been provided from the Vernon facility.
The company filed bankruptcy June 10 and received the court’s interim approval June 11 for its $500 million debtor-in-possession (DIP) financing agreement with JP Morgan Chase, to facilitate and ensure the continued operation of Exide’s global business. The company’s asset-based lending facility, with outstanding obligations of about $160 million, will be paid off in full as a part of the new funding.
Judge Kevin J. Carey also authorized the company to continue its employee wages and benefits according to their existing plans, and to honor certain prepetition obligations to customers and to continue other customer programs including warranties, rebates, returns, refunds, exchanges, adjustments, promotions, credits, guarantees and all such other similar policies, programs and practices of the Debtors in the ordinary course of business on a post-petition basis.
Exide operates 13 manufacturing plants and 74 distribution locations in the United States. The company has five smelters, three of which are active battery collection and recycling facilities. Exide’s bankruptcy petition said the company or its contractors recycled about 530,575 tons of batteries, plant scrap and range lead in its fiscal 2013.
The bankruptcy petition listed the Exide’s top 20 unsecured creditors, which include $51.9 million to Wilmington Trust, National Association; $4.1 million to Oracle Credit Corp.; $2.8 million to Richardson Molding Inc.; claims of $1.4 million or less each to various business services and suppliers; and an as yet undetermined amount to the Pension Benefit Guarantee Corp., which protects employee defined benefit pension plans. (continued)