MSD Performance Files for Chapter 11 to Find a Buyer
DBR Small Cap ,
Jacqueline Palank,
September 06, 2013,
(c) 2013 Dow Jones & Company, Inc.
MSD Performance Inc ., which makes performance auto products for street and racing use, on Thursday filed for Chapter 11 protection.
After failing to find a buyer to please its lenders last year, and with a forbearance period running out Friday, MSD Performance said it would use the breathing room offered in Chapter 11 to find a buyer.
"Running a marketing process under court supervision will enable the debtors to maintain their ongoing businesses and preserve the jobs of their approximately 450 employees," MSD Performance Chief Executive Ron Turcotte said in court papers filed Friday.
To ensure MSD Performance can afford the costs of a Chapter 11 sale process, lenders have agreed to let the company use the cash securing their claims, subject to court approval.
Based in El Paso, Texas, MSD Performance was founded in 1970 as a research and development company by two engineers who were working on a U.S. military missile range. It has since shifted gears, now making ignition performance products like performance coils, spark-plug wires and fuel-injection systems.
MSD Performance sought to accelerate its growth in 2005 and 2006, snapping up several companies---Superchips, Racepak and Edge Products---during the height of the mergers and acquisitions boom. Superchips' products, for instance, let users increase the horsepower, torque and fuel efficiency of their vehicles.
While the deals allowed MSD Performance to expand its product offerings, they also required the company to take on debt to fund the purchases. In 2009, MSD Performance sought to confront its significant debt load---as well as challenges from increasing competition and the economic downturn---through an out-of-court restructuring.
Still, its liquidity remained tight, and the company struck a deal with its lenders to push out its debt maturity from March 2012 to January 2013 as long as it put itself up for sale. While several offers came in, none were high enough for the lenders, who have since entered into a series of forbearance agreements with MSD Performance that have kept the debt from coming due.
Among MSD Performance's lenders is an affiliate of private equity firm Z Capital Partners LLC , which since May has acquired a majority of the $91.9 million that's currently outstanding. Z Capital this year offered to purchase MSD Performance's assets, but the company's other lenders couldn't reach a consensus on the offer before the forbearance period expired.
"The debtors remain hopeful, however, that negotiations with Z Capital or any other interested bidder will continue in connection with a court-supervised sale process," Mr. Turcotte said in court papers.
Any sale plans would be subject to the approval of the U.S. Bankruptcy Court in Wilmington, Del., where MSD Performance sought protection.
MSD Performance reported assets of $50 million to $100 million and debts of $100 million to $500 million in its bankruptcy petition.
Lawyers from Jones Day and Richards, Layton & Finger are representing MSD Performance in its bankruptcy case, which has been assigned to Judge Peter J. Walsh.
DBR Small Cap ,
Jacqueline Palank,
September 06, 2013,
(c) 2013 Dow Jones & Company, Inc.
MSD Performance Inc ., which makes performance auto products for street and racing use, on Thursday filed for Chapter 11 protection.
After failing to find a buyer to please its lenders last year, and with a forbearance period running out Friday, MSD Performance said it would use the breathing room offered in Chapter 11 to find a buyer.
"Running a marketing process under court supervision will enable the debtors to maintain their ongoing businesses and preserve the jobs of their approximately 450 employees," MSD Performance Chief Executive Ron Turcotte said in court papers filed Friday.
To ensure MSD Performance can afford the costs of a Chapter 11 sale process, lenders have agreed to let the company use the cash securing their claims, subject to court approval.
Based in El Paso, Texas, MSD Performance was founded in 1970 as a research and development company by two engineers who were working on a U.S. military missile range. It has since shifted gears, now making ignition performance products like performance coils, spark-plug wires and fuel-injection systems.
MSD Performance sought to accelerate its growth in 2005 and 2006, snapping up several companies---Superchips, Racepak and Edge Products---during the height of the mergers and acquisitions boom. Superchips' products, for instance, let users increase the horsepower, torque and fuel efficiency of their vehicles.
While the deals allowed MSD Performance to expand its product offerings, they also required the company to take on debt to fund the purchases. In 2009, MSD Performance sought to confront its significant debt load---as well as challenges from increasing competition and the economic downturn---through an out-of-court restructuring.
Still, its liquidity remained tight, and the company struck a deal with its lenders to push out its debt maturity from March 2012 to January 2013 as long as it put itself up for sale. While several offers came in, none were high enough for the lenders, who have since entered into a series of forbearance agreements with MSD Performance that have kept the debt from coming due.
Among MSD Performance's lenders is an affiliate of private equity firm Z Capital Partners LLC , which since May has acquired a majority of the $91.9 million that's currently outstanding. Z Capital this year offered to purchase MSD Performance's assets, but the company's other lenders couldn't reach a consensus on the offer before the forbearance period expired.
"The debtors remain hopeful, however, that negotiations with Z Capital or any other interested bidder will continue in connection with a court-supervised sale process," Mr. Turcotte said in court papers.
Any sale plans would be subject to the approval of the U.S. Bankruptcy Court in Wilmington, Del., where MSD Performance sought protection.
MSD Performance reported assets of $50 million to $100 million and debts of $100 million to $500 million in its bankruptcy petition.
Lawyers from Jones Day and Richards, Layton & Finger are representing MSD Performance in its bankruptcy case, which has been assigned to Judge Peter J. Walsh.
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