October 26, 2020 – The Debtors notified the Court that their Fourth Amended Plan of Reorganization had become effective as of October 26, 2020 [Docket No. 1039]. The Court had previously confirmed the Debtors’ Plan on October 16, 2020 [Docket No. 977].

On May 19, 2020, Exide Holdings, Inc. and four affiliated Debtors (“Exide” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20- 11157. At filing, the Debtors, a global provider of stored electrical-energy solutions, noted estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $1.0bn and $10.0bn.

The Debtors were represented by Daniel J. DeFranceschi of Richards, Layton & Finger, P.A. Further board-authorized engagements included (i) Weil, Gotshal & Manges LLP as general bankruptcy counsel, (ii) Ankura Consulting Group, LLC as financial advisors, (iii) Houlihan Lokey Capital, Inc. as investment banker and (iv) Prime Clerk as claims agent.

An administrative claims bar date of November 30, 2020 has been set.

In a press release heralding the operational import of the effectiveness date, the management of "the new Exide" (ie the former Debtors' going concern Europe and ROW assets) announced: "

Exide Technologies' former EMEA and Asia-Pacific business now operates as a standalone company under new owners. Today, the battery manufacturer announced the 'closing of the deal', successfully concluding its separation from the Exide Holdings, Inc. in the US and the transfer of its entire business to a group of long-term shareholders, under the US-based Energy Technologies Holdings LLC. As part of this transaction, the business received further multi-million-dollar funding from the new investors.

The new Exide, headquartered near Paris, France, is a leading provider of advanced energy solutions for the automotive and industrial markets. The company's more than 5,000 employees across Europe, the Middle East, Asia, and Australia serve the global markets with best in class products & services under several well-known brands. With two R&D facilities and eleven production plants in Europe, Exide is committed to high-quality engineering, manufacturing and recycling, and continues to innovate according to customers' evolving energy storage needs."

That Paris headquarters conveniently distant from Vernon, California where a "dangerously contaminated" and long shuttered Exide plant will long serve as an expensive and painful reminder of the former Debtors' North American operations. Those operations were sold for $178.6mn in August 2020 to an affiliate of Greenwich, Connecticut based private equity firm Atlas Holdings; with that sale unencumbered by the legacy environmental liability at Vernon, a liability which the bankruptcy Court has now left in the hands of the State of California.

Previous Bankruptcies

"New Exide" has a familiar ring. This was the Debtors' second chapter 11 filing in seven years and the third in under 20. In June 2013, Debtor Exide Technologies, LLC spent two difficult years in bankruptcy (lead case Delaware 13-11482, the “2013 Chapter 11 Case”) and eventually emerged having deleveraged Exide's balance sheet by approximately $600.0mn; raised approximately $165.0mn in new capital; and secured a $200.0mn exit ABL financing facility. The Debtors emerged from their first Chapter 11 in April 2004 (that too a long two year process).

Plan Overview

The Debtors' memorandum in support of Plan confirmation provides provided a pre-confirmation hearing overview: “The Amended Plan…will preserve over 5,000 jobs, maximize recoveries to creditors and effectuate the safe and orderly transition of the Debtors’ Non-Performing Properties. A consensual chapter 11 plan supported by almost 100% of the Debtors’ secured noteholders, the Creditors’ Committee, the PBGC, and all but one of the Debtors’ fourteen (14) environmental regulators (all such thirteen (14) regulators, including California Department of Toxic Substances Control (‘California DTSC’), collectively, the ‘Participating Governmental Authorities’) seemed unimaginable at the commencement of these chapter 11 cases just five (5) months ago. The limited liquidity available to the Debtors, the uncertainties and challenges caused by the global pandemic outbreak, and the number of highly complex and difficult issues that had to be addressed presented the potential for years of extended, complex and expensive litigation among competing parties and interests. But, with the assistance of five (5) Court-approved mediators (collectively, the ‘Mediators’)…the Debtors and their stakeholders have achieved the impossible. 

The Amended Plan is premised upon a hard-fought Global Settlement that entails a fully integrated compromise and settlement of potential claims that could be brought by the Debtors, the Participating Governmental Authorities, Creditors’ Committee, and Environmental Sureties. Importantly, the Global Settlement provides full payment of administrative and priority claims, a guaranteed recovery for general unsecured creditors that otherwise was highly uncertain, and resolves significant and contentious issues regarding the Non-Performing Properties and the Debtors’ prepetition attempts to recapitalize and reorganize their businesses through the June 2019 Financing and the Optimization. The Amended Plan also incorporates the Europe/ROW Sale Transaction pursuant to which the Debtors’ secured noteholders will consummate their market-tested credit bid to purchase the equity interests of the Debtors’ European and Rest-of-World businesses which, together with the financing to those businesses being provided by the Ad Hoc Group, will enable such businesses to continue as a going concern. In addition, following extensive negotiations, the Amended Plan now also includes a settlement with the PBGC pursuant to which the Transferred Entities will make a settlement payment of $6.0 million to the PBGC in exchange for the PBGC’s release of the PBGC Claims against the Transferred Entities, Consenting Creditors and certain of their Related Parties."

Restructuring Support Agreement

Exide entered into a restructuring support agreement (the "RSA," see Docket No. 14, Exhibit C) further to which an ad hoc group of the Company’s noteholders (the "Ad Hoc Group") agreed to serve as a credit bidding stalking horse in a sale of the Debtors' EMEA and Asia-Pacific business. The agreement included a “go-shop” period with a bid submission deadline and auction to be held in early July 2020.  

In connection with the RSA, the Ad Hoc Group submitted a binding term sheet (annexed to the RSA) containing certain key terms in respect of their $430.0mn "Europe/ROW Credit Bid." In connection with the Europe/ROW Credit Bid, the Ad Hoc Group has also committed to (i) provide an initial $25.0mn in interim financing to Exide International be used for working capital and general corporate purposes within the Exide Europe/ROW business segment, and up to $50.0mn of new money exit financing in their discretion (collectively, the “Interim Financing Facility”) and (ii) refinance all amounts owed by non-Debtor Exide Technologies (Transportation) Limited under the ABL Credit Agreement.

The California DTSC Objection

In confirming the Plan, the Court has denied and overruled the objection of the California Department of Toxic Substances Control ("California DTSC") which has now appealed that ruling to the United States District Court for the District of Delaware [Docket No. 1000]. The California DTSC has argued that the Debtors' former battery-recycling plant in Vernon, near Los Angeles, remains contaminated with lead and arsenic and poses a continuing threat to local residents.

[As previously reported] The Memorandum also provided the Debtors’ view on their last remaining Plan hurdle, the objection of the California Department of Toxic Substances Control (‘California DTSC’), as to which the Debtors argue: “The reality that all parties in interest have accepted (except the state of California) is that the Debtors have limited funds and no means to orderly transition the Non-Performing Properties absent the Global Settlement and the financial support offered by the Consenting Creditors and Transferred Entities. There is no escaping the reality that the Non-Performing Properties must be immediately transitioned or abandoned. The Debtors are simply unable to maintain them. In addition, if the Plan is not confirmed, administrative and priority claims will not be satisfied and general unsecured creditors will likely recover nothing. The ongoing operations of the Debtors’ European and Rest-of-World businesses will also be put in jeopardy and thousands of jobs unnecessarily put at risk.

Unfortunately, after investing months of time and resources, the Debtors and other Global Settlement Parties learned at the last minute that California DTSC would not proceed with the settlement recommended by the Mediators and accepted by all other parties. No good reason has been offered for California DTSC’s abrupt about-face. Instead, California DTSC appears to have decided that it must try to blow up the Amended Plan and Global Settlement so that it can claim a hollow victory with its citizens…Absent California DTSC’s consent or approval by the Court of the Third Party Releases as to California DTSC, the Debtors have no choice but to abandon the Vernon Non-Performing Property.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms are in the Plan and/or Disclosure Statement):

• Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 3 (“ABL Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
• Class 4 (“Superpriority Notes Guarantee Claims”) is impaired and entitled to vote on the Plan. The estimated recovery is 100%. Treatment: Following the Europe/ROW Closing, the Superpriority Notes and all of the outstanding Claims arising thereunder (including, for the avoidance of doubt, the Superpriority Notes Guarantee Claims) shall be contributed by the Consenting Creditors to the Europe/ROW Purchaser in accordance with the Europe/ROW Purchase Agreement. At the Europe/ROW Closing, the Europe/ROW Purchaser shall contribute the Superpriority Notes to Exide International and the Superpriority Notes shall be cancelled. At the Europe/ROW Closing and without limiting the above, and without any further action by the Consenting Creditors, the Europe/ROW Purchaser or any other party or person or further order of the Bankruptcy Court, (i) the Superpriority Notes Guarantee Claims against the Debtors shall be deemed fully satisfied, released, and discharged and (ii) any liens or security interests granted by the Debtors under the Superpriority Notes Indenture and the Superpriority Security Documents shall be deemed terminated, released, discharged and without further effect.
• Class 5 (“Exchange Priority Notes Claims”) is impaired and entitled to vote on the Plan. The estimated recovery is 17%. Each Holder shall receive (i) at the Europe/ROW Closing, its Pro Rata share of the consideration contemplated by Section 5.1(a) of the Plan in exchange for an aggregate amount of $70.0mn of Exchange Priority Notes Claims and (ii) for all remaining Allowed Exchange Priority Notes Claims, Net Cash Proceeds after all Allowed ABL Claims are satisfied in full in Cash, until all Allowed Exchange Priority Notes Claims are satisfied in full in Cash or such Net Cash Proceeds are exhausted.
• Class 6 (“First Lien Notes Claims”) is impaired and entitled to vote on the Plan. The estimated recovery is 0%. The Holder shall receive its Pro Rata share of Net Cash Proceeds after all Allowed ABL Claims and Allowed Exchange Priority Notes Claims are satisfied in full in accordance with the Plan, until all Allowed First Lien Notes Claims are satisfied in full in Cash or such Net Cash Proceeds are exhausted.
• Class 7 (“General Unsecured Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 1%. Each Holder shall receive its Pro Rata share of (A) the GUC Trust Beneficial A Interests and (B) Net Cash Proceeds after the ABL Claims, Exchange Priority Notes Claims and First Lien Notes Claims are satisfied in full in accordance with the Plan, which shall be shared on a Pro Rata basis with the holders of Allowed Environmental NPP Claims, until all Allowed General Unsecured Claims are satisfied in full in Cash or such Net Cash Proceeds are exhausted. All Notes Deficiency Claims shall not receive distributions in accordance with this Section 4.7(b) and such Claims are waived for all purposes, including for voting and for distributions pursuant to and in accordance with Section 4.7(b) of the Plan. In lieu of the treatment provided in Section 4.7(b)(i), Westchester shall receive, in full and final satisfaction and release of, and in exchange for, all of its Allowed General Unsecured Claims (which shall be in a fixed amount of $30.0mn) (A) its Pro Rata share of (1) GUC Trust Beneficial B Interests and (2) Net Cash Proceeds after the ABL Claims, Exchange Priority Notes Claims and First Lien Notes Claims are satisfied in full in accordance with the Plan, which beneficial interests shall be shared on a Pro Rata basis with the holders of Allowed Environmental NPP Claims in accordance with Section 4.8(b)(ii), until all such Allowed General Unsecured Claims are satisfied in full in Cash or such Net Cash Proceeds are exhausted, and (B) the Westchester Catch-up Payments.
• Class 8 (“Environmental NPP Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Each Holder shall receive:

1. (A) if such holder is a Global Settlement Party, then such holder shall be a beneficiary of the Environmental Trust Beneficial Interests and/or the Vernon Environmental Trust Beneficial Interests, as applicable under the Environmental Settlement Documents; (B) if such holder is not a Global Settlement Party and the Payment Condition is satisfied as to such holder but the Vernon Trust Condition is not satisfied, then the Non-Performing Property relating to such holder’s Environmental NPP Claim shall be abandoned and the relevant Global Settlement Payment shall be made, in each case in accordance with Section 5.2(e)(ii) of the Plan; (C) if such holder is not a Global Settlement Party and the Payment Condition is not satisfied as to such holder, the Non-Performing Property relating to such holder’s Environmental NPP Claim shall be abandoned in accordance with Section 5.2(e)(iii) of the Plan and such holder shall receive a first priority Lien against such Non-Performing Property to secure its Environmental NPP Claim; or (D) if such holder is not a Global Settlement Party and the Payment Condition is satisfied as to such holder and the Vernon Trust Condition is satisfied, then such holder shall be a beneficiary of the Vernon Environmental Trust Beneficial Interests in accordance with the Environmental Settlement Documents;
2. its Pro Rata share of GUC Trust Beneficial B Interests;
3. Net Cash Proceeds after the ABL Claims, Exchange Priority Notes Claims and First Lien Notes Claims are satisfied in full in accordance with the Plan, which shall be shared on a Pro Rata basis with holders of Allowed General Unsecured Claims, until all Allowed Environmental NPP Claim are satisfied in full in Cash or such Net Cash Proceeds are exhausted; and
4. Notwithstanding anything to the contrary, the foregoing shall not affect any defensive rights of set-off or recoupment of any holder of an Environmental NPP Claim against any Claims asserted by the Debtors, Wind-Down Estates, Plan Administrator or GUC Trustee.

• Class 9 (“Intercompany Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
• Class 10 (“Intercompany Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
• Class 11 (“Holdings Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%. Each Holder shall receive the following treatment: (i) on the Effective Date, all Holdings Equity Interests shall be cancelled and one share of Holdings common stock (the “Single Share”) shall be issued to the Plan Administrator to hold in trust as custodian for the benefit of the former holders of Holdings Stock consistent with their former relative priority and economic entitlements and the Single Share shall be recorded on the books and records maintained by the Plan Administrator; (ii) each former holder of Holdings Stock (through their interest in the Single Share, as applicable) shall neither receive nor retain any property of the Estate or direct interest in property of the Estate on account of such Holdings Stock; provided, that in the event that all Allowed Claims have been satisfied in full in accordance with the Bankruptcy Code and the Plan, each former holder of Holdings Stock may receive its share of any remaining assets of Holdings consistent with such holder’s rights of payment existing immediately prior to the Commencement Date unless otherwise determined by the Plan Administrator, on the date that Holdings’ Chapter 11 Case is closed in accordance with Section 5.16 of the Plan, the Single Share issued on the Effective Date shall be deemed cancelled and of no further force and effect provided that such cancellation does not adversely impact the Debtors’ Estates; and (iii) the continuing rights of former holders of Holdings Stock (including through their interest in Single Share or otherwise) shall be nontransferable except (A) by operation of law or (B) for administrative transfers where the ultimate beneficiary has not changed, subject to the Plan Administrator’s consent.
• Class 12 (“Subordinated Securities Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.

Voting Results

On October 12, 2020, the Debtors’ claims agent notified the Court of the Plan voting results [Docket No. 940], which were as follows:

• Class 4 (“Superpriority Notes Guarantee Claims”): 59 claim holders, representing $147,733,293.00 in amount and 100% in number, accepted the Plan.
• Class 5 (“Exchange Priority Notes Claims”): 62 claim holders, representing $351,648,082.00 in amount and 100% in number, accepted the Plan.
• Class 6 (“First Lien Notes Claims”): 57 claim holders, representing $146,717,939.00 in amount and 100% in number, accepted the Plan.

Global Settlement Agreement

The Debtors’ most recently filed Disclosure Statement [Docket No. 743] provides, “The Plan incorporates a proposed Global Settlement among the Debtors, the Creditors’ Committee, the Ad Hoc Group, the Settling Governmental Authorities and the Environmental Sureties.”

It continues, “The proposed Global Settlement includes the following:

• Environmental Trust: An environmental trust (the ‘Environmental Trust’) will be established pursuant to the Plan. The Environmental Trust will receive (i) a substantial cash contribution to be paid by the Debtors’ non-Debtor European and Rest of World Affiliates that will be transferred in accordance with the Europe/ROW Credit Bid; (ii) payment of the full amount of any surety bonds in accordance with the terms of the surety bond agreements (or as otherwise provided by applicable state law); (iii) title to the Debtors’ owned NPPs (other than the NPP located in Frisco, Texas) free and clear of all claims, liens and interests; and (iv) environmental causes of action assigned by the Debtors, including any insurance coverage for environmental liabilities relating to the NPPs. Moreover, the Debtors, Creditors’ Committee and the Ad Hoc Group have agreed to waive all rights relating to sale proceeds from the potential future sale of any NPPs.
• General Unsecured Creditors’ Trust: A general unsecured creditors’ trust (the ‘GUC Trust’) will be established pursuant to the Plan. The GUC Trust will receive (i) a substantial cash contribution in the amount of $2.4mn from the Transferred Entities (the ‘GUC Global Settlement Payment’); and (ii) certain non-environmental causes of action. Moreover, the Environmental Sureties and the Ad Hoc Group have agreed to waive distributions on account of any general unsecured claims (including deficiency claims) against the GUC Trust. The Settling Governmental Authorities are entitled to receive distributions from the GUC Trust in accordance with the following:

1. The Settling Governmental Authorities whose representatives have recommended the proposed Global Settlement may receive distributions from the GUC Settlement Payment solely on account of non-environmental claims;
2. The Settling Governmental Authorities whose representatives have recommended the proposed Global Settlement will waive distributions from the GUC Settlement Payment solely on account of environmental claims; and
3. To the extent the GUC Trust receives proceeds in excess of the GUC Settlement Payment, the Settling Governmental Authorities whose representatives have recommended the proposed Global Settlement may receive distributions from such excess proceeds on account of both environmental and non-environmental claims.

• Frisco Trust: An environmental trust (the ‘Frisco Trust’) will be established pursuant to the Plan. The Frisco Trust will receive (i) a cash contribution to be paid by the Debtors’ non-Debtor European and Rest of World Affiliates that will be transferred in accordance with the Europe/ROW Credit Bid; (ii) payment of the full amount of any surety bonds, up to the full cost of remediation, in accordance with the terms of the surety bond agreements (or as otherwise provided by applicable state law); (iii) title to the Frisco NPP free and clear of all claims, liens and interests; and (iv) environmental causes of action related to the Frisco NPP assigned by the Debtors. Moreover, the Debtors, Creditors’ Committee and the Ad Hoc Group have agreed to waive all rights relating to sale proceeds from the potential future sale of the Frisco NPP.”

Significant Prepetition Shareholders

• Mackay Shields LLC: 39.83%
• Alliancebernstein LP: 19.12%
• D.E. Shaw Galvanic Portfolios, L.L.C.: 10.76%
• Neuberger Berman Group LLC: 6.38%

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Messing Declaration”), Roy Messing, the Debtors’ Chief Restructuring Officer, detailed the events leading to Exide’s Chapter 11 filing. The Messing Declaration provides: "Even after its emergence from bankruptcy in April 2015, the Company’s business continued to face significant operational challenges, substantial environmental costs, and industry trends that severely constrained its liquidity."

On an operational level, Messing highlights (i) the increased cost of lead following the closure of the Debtors' recycling facilities in Frisco, Texas and Vernon, California, (ii) continued operational inefficiencies (and reduced margins) at mixed-use facilities and (iii) the recent impact of the COVID-19 pandemic.

Operational shortcomings have in turn led to cash flows insufficient to service the level of debt with which the Debtors emerged from the 2013 Chapter 11 and which continued to grow as the Debtors funded expenditures on facility remediation costs and capital investments. As of March 31, 2020, the Company’s indebtedness was approximately 9.2x EBITDA with debt servicing costs have had the knock-on impact on limiting the Debtors’ ability to invest in product and growth initiatives. 

The Debtors also have considerable environmental obligations and liabilities which “could cost an additional $200 million or more to address over the next five years.”

Prepetition Indebtedness

As at filing, the Debtors, together with their non-Debtor affiliates, had outstanding funded debt obligations in the amount of approximately $817.4mn in the aggregate, summarized in the following chart:

Key Documents

The Amended Disclosure Statement [Docket No. 743] attached the following documents:

• Exhibit A: Plan (filed separately)
• Exhibit B: Restructuring Support Agreement
• Exhibit C-1: Organizational Structure Chart
• Exhibit C-2: Lien Priority Chart
• Exhibit D: Liquidation Analysis
• Exhibit E: Pension Benefit Guaranty Corporation’s Objection to Debtors’ Proposed Disclosure Statement (Docket No. 735)

Plan Supplements

The Debtors filed Plan Supplements [Docket No. 821, 825, 939, 955 and 961] which attached the following documents:

Docket No. 821

• Exhibit 1: Assumption Schedule for the Europe/ROW Sale Transaction;
• Exhibit 2: Form of GUC Trust Agreement
• Exhibit 3: Proposed Environmental Settlement Agreement
• Exhibit 4: Proposed Frisco Settlement Agreement
• Exhibit 5: Alternative Transaction Structure Summary 
• Exhibit 6: Columbus NPP Termination Documents.

Docket No. 825

• Exhibit A-1: Revised Assumption Schedule for the Europe/ROW Sale Transaction [Docket No. 825]
• Exhibit A-2: Blackline [Docket No. 825]

 Docket No. 939

• Exhibit A-1: Assumption Schedule for the Environmental Trust
• Exhibit A-2: Blackline of Assumption Schedule for the Environmental Trust
• Exhibit A-3: Contracts Removed from the Assumption Schedule for the Environmental Trust

Docket No. 955

• Exhibit A-1: Europe/ROW Purchase Agreement
• Exhibit A-2: Blackline of Europe/ROW Purchase Agreement

Docket No. 961

• Exhibit A-1: Frisco Settlement Agreement
• Exhibit A-2: Blackline of the Frisco Settlement Agreement

Liquidation Analysis (see Exhibit D of Disclosure Statement [Docket No. 743] for notes)

Corporate Structure

About the Debtors

According to the Debtors: “For more than 130 years, Exide Technologies, LLC (exide.com) has been Powering the World Forward as a global provider of stored electrical-energy solutions for the Transportation and Industrial markets. Headquartered in Milton, Georgia, Exide operates in 80 countries with more than 8,000 employees. Exide produces a range of battery and energy storage systems and specialty applications for the Transportation, Network Power and Motive Power markets and industries including agricultural, automotive, electric, light and heavy-duty truck, marine, materials handling, military, mining, power-sport, railroad, security, telecommunications, utility and uninterruptible power supply (UPS), among others. As one of the world’s largest secondary recyclers, the company is committed to environmental sustainability.”

The Messing Declaration adds: "Exide is a global leader in stored electrical energy solutions and one of the world’s largest producers and recyclers of lead-acid and lithium-ion batteries, with operations in more than twenty (20) countries. The Company is headquartered in Milton, Georgia and through its four global business groups – Transportation Americas, Transportation Europe and Rest of World (“ROW”), Industrial Energy Americas, and Industrial Energy Europe and ROW – the Company provides a comprehensive range of stored electrical energy products and services for industrial and transportation applications. The Company manufactures and distributes transportation and industrial batteries in North America, Europe, Asia, the Middle East, India, Australia, and New Zealand."

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