Pace Industries, LLC announced that it has reached an agreement with its senior secured lenders on the terms of a comprehensive financial restructuring plan, which will deleverage the Company's balance sheet. This agreement has support from 100% of the holders of its senior secured notes as well as its revolving credit facility lenders.
Upon implementation, this agreement will give the Company the financial foundation necessary to resume normal-course operations following the COVID-19 outbreak, realize the full benefit of its cost-savings initiatives and strategic investments recently executed, and continue to serve its customers as a leading fully-integrated provider of die cast aluminum, magnesium and zinc components.
To effectuate the plan and facilitate these important changes to the Company's capital structure, the Company and its U.S. subsidiaries have initiated a voluntary prepackaged Chapter 11 process in the U.S. Bankruptcy Court for the District of Delaware.
The Company's operations in Mexico are unaffected by the filings, although they will benefit long-term from the actions the parent company is taking to strengthen its financial position.
The Company's senior secured noteholders, along with its existing revolving credit lenders, will provide commitments for up to $175 million in debtor-in-possession financing to help ensure that the Company can meet its commitments during the process. Under the terms of the proposed prepackaged plan, the Company will convert its existing senior secured notes into 100% of the equity in the reorganized Company. As a result of its noteholder and lender support, the Company expects to complete the process in the second quarter of 2020 – emerging as a financially stronger company that is well-positioned to succeed in the post-COVID-19 environment.
"Over the past two years, we launched significant new programs for the automotive industry to further penetrate this important growth market and implemented a series of cost-saving initiatives to position our business for long-term success," said Scott Bull, Chief Executive Officer. "Unfortunately, we were not able to realize the full benefits of these new programs and initiatives before the coronavirus weakened demand, disrupted our supply chain and forced us to temporarily close many of our plants in the United States."
"We are confident in our go-forward direction and the underlying strength of our business and are taking these actions now to ensure we are positioned to realize our full potential when we – and our customers – are able to resume normal-course operations," Mr. Bull continued. "We thank our lenders, employees, customers and suppliers for their support and look forward to being an even stronger partner as a result of the actions we're taking to enhance our financial position."
The Company has filed customary motions that will allow it to maintain employee wage and benefit programs, honor customer warranties as usual and continue to pay suppliers. Although the motions remain subject to Court approval, the Company expects that all trade creditors, employees, sales agents and unsecured creditors will be paid in full and on time in the normal course of business. Additionally, the Company will maintain all of its current standards for safety, quality and corporate citizenship both during and after the Chapter 11 process.
Pace Industries is represented by Willkie Farr & Gallagher LLP and Young Conaway Stargatt & Taylor, LLP. FTI Consulting is serving as financial advisor. The senior secured noteholders are represented by Schulte Roth & Zabel LLP and the revolving credit facility lenders are represented by McGuireWoods LLP and Conway MacKenzie.