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August 29, 2022 – Lumileds Holding B.V. and nine affiliated debtors (together, “Lumileds” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case No. 22-11155 (Judge Lisa G. Beckerman). The Debtors, "a global leader in innovative lighting solutions," are represented by George A. Davis of Latham & Watkins LLP. Further board-authorized engagements include: (i) Paul, Weiss, Rifkind, Wharton & Garrison, LLP as corporate counsel, (ii) AlixPartners, LLP as financial advisors, (iii) Evercore as investment bankers and (iv) Epiq Corporate Restructuring, LLC as claims agent.
PJT Partners is acting as financial advisor for an ad hoc group of Lumileds’ lenders, and Gibson, Dunn & Crutcher LLP is acting as the group’s legal counsel.
The Debtors’ lead petition notes between 100 and 200 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn (although note $1.72bn of funded debt for consolidated Debtors below). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) UWV ($2.3mn tax claim), (ii) LBA RVI-COMPANY I, LP ($1.8mn trade payable claim) and (iii) ATOS NEDERLAND B.V. ($902k trade payable claim).
Also on August 29th, the Debtors filed copies of the earlier solicited prepackaged Plan and related Disclosure Statement [Docket Nos. 24 and 25, respectively]; and separately filed a motion requesting Court approval of, inter alia, (i) proposed Plan solicitation and voting procedures and (ii) a request to waive filing requirements as to Schedules A/B and financial statement (SOFAs) and (iii) a proposed timetable culminating in an October 3, 2022 Plan confirmation hearing [Docket No. 22].
In a press release announcing the filing, the Debtors stated that it: "it has entered into a restructuring support agreement (the 'RSA' or the 'Agreement') with its lenders holding a significant majority of the loans outstanding under its prepetition first lien debt facility on the terms of a comprehensive financial restructuring that would significantly de-leverage and strengthen its balance sheet by over $1.3 billion, accelerate Lumileds’ growth, and enable further investment in innovation to pursue additional strategic opportunities through the injection of up to $275 million of liquidity.
To efficiently implement the de-leveraging, a narrowly focused prepackaged Chapter 11 plan (the 'Plan') involving only Lumileds’ U.S. and Dutch entities has commenced in the U.S. Bankruptcy Court for the Southern District of New York (the 'Court'). Lumileds’ European, Asian, and other foreign subsidiaries and affiliates are not included in the filing and are unaffected by the Chapter 11 process. The Company has obtained the necessary support from its lenders to confirm the Plan prior to commencing its proceedings and expects to meet the requirements to confirm the Plan and emerge from Chapter 11 within approximately sixty days.
The Debtors’ CEO Matt Roney commented: “We have proactively taken steps to de-leverage our balance sheet given the ongoing challenges presented by global supply constraints, COVID-related issues, and the crisis in Ukraine.”
Restructuring Support Agreement
Under the terms of the RSA, the existing secured lenders are expected to commit to support, and vote in favor of, a transaction that, when executed, will reduce the Company’s funded debt by approximately $1.3 billion, from approximately $1.7 billion to $400 million comprised of takeback debt and post-petition loans, which will be combined into a 5-year exit facility.
The RSA also contemplates a commitment from certain of its lenders of up to $275 million in debtor-in-possession ("DIP") financing, available as part of the Chapter 11 process. Subject to the Court’s approval, the DIP financing, together with the Company's available cash reserves and cash provided by operations, is expected to provide sufficient liquidity for Lumileds to continue meeting its ongoing obligations, including all obligations to customers, vendors, and suppliers, as well as employee wages, salaries, and benefits programs.
Events Leading to the Chapter 11 Filing
The Disclosure Statement provides: "A number of macroeconomic and geopolitical events have altered demand for the Debtors’ products, raised costs, or otherwise negatively affected the Debtors’ financial condition, which, in turn, has resulted in a liquidity crisis that prompted the filing of the Chapter 11 Cases.
- First, the COVID-19 pandemic and related supply chain disruptions have directly negatively affected Lumileds’ revenue. Revenue losses are attributable to decreased demand from customers in China, as a result of lockdowns, and from OEMs, as a result of the general reduction of car production due to the global semiconductor shortage and other supply chain issues. Additionally, many of the Company’s manufacturing facilities were forced to close temporarily for extended periods of time due to lockdowns in Asia, thus compounding supply chain difficulties within the Company’s integrated production process.
- Second, the Russian invasion of Ukraine impacted raw material supply and energy pricing while further compromising supply chain stability. Moreover, the Debtors fully suspended their aftermarket automotive business in Russia in April 2022, which represented a significant and permanent loss of revenue.
- Third, elevated raw material and utility costs, rising wages, inflation, and unfavorable foreign exchange and interest rates, in addition to the aforementioned declines in automobile production, have increased pressure on both the Debtors and their customers. For the Debtors, this has resulted in higher costs without a corresponding ability to raise prices to levels that effectively combat inflation (i.e., lower margins). The Debtors’ profitability is dependent on their customers’ ability to pay for the premium technologies that are the Debtors’ hallmark. Thus, as their customers have become unable or unwilling to pay this premium, the Debtors have been correspondingly affected."
As of the Petition date, the Debtors had approximately $1.7bn in aggregate debt outstanding as summarized below:
Anticipated Exit Capital Structure
The Debtors anticipate an exit structure as summarized below:
The Disclosure Statement attaches the following documents:
- Exhibit A: Plan of Reorganization
- Exhibit B: Restructuring Support Agreement
- Exhibit C: Financial Projections
- Exhibit D: Liquidation Analysis
- Exhibit E: Valuation Analysis
- Exhibit F: Organizational Structure
About the Debtors
According to the Debtors: "Lumileds is a global leader in OEM and aftermarket automotive lighting and accessories, camera flash for mobile devices, MicroLED, and light sources for general illumination, horticulture, and human-centric lighting. Our approximately 7,000 employees operate in over 30 countries and partner with our customers to deliver never before possible solutions for lighting, safety, and well-being."
Corporate Structure Chart (simplified version below, see also Exhibit F to Disclosure Statement)
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