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Finding Finance Strategies – and Tactics – That Work

Finding Finance Strategies – and Tactics – That Work. The creative avenues distressed companies are using to meet their financing needs in this market. David L. Treadwell Chief Operating Officer EaglePicher Incorporated. EaglePicher Incorporated.

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Finding Finance Strategies – and Tactics – That Work

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  1. Finding Finance Strategies – and Tactics – That Work The creative avenues distressed companies are using to meet their financing needs in this market David L. Treadwell Chief Operating Officer EaglePicher Incorporated

  2. EaglePicher Incorporated Seven (7) Operating Divisions With Total Revenues of $662mm • Divisions Include: • Hillsdale Automotive $285mm • Wolverine Automotive $105mm • Filtration & Minerals $ 90mm • Government Power $130mm • Distributed Batteries $ 12mm • Medical Batteries $ 3mm • Pharma $ 11mm • Boron $ 26mm

  3. EaglePicher Incorporated • Filed for Chapter 11 Bankruptcy in April, 2005 • Primary Reasons: • Hillsdale division operating performance went from $40mm to $3mm over two year period • Invested over $50mm in JV’s with $0 return • Tech group operating performance significantly off – over three businesses.

  4. Financing Strategy • First – Get credibility in the numbers • Data is always bad • Financial advisory firms • Second – Plan to stop the bleeding, fix operations and execute • Quick action with firm, consistent direction • Involvement of customers • Third –Develop a plan to return the business to health and execute

  5. Financing Strategy • Throughout – Build credibility with employees, customers, vendors and financial participants • Traditional lending sources not likely to be much help • Good News – Visibility of auto sector troubles have brought availability of high risk debt to our market • Bad News – Objectives are not always in line with creating long term value and “high risk” is “high yield” • Find source that has incentives aligned with company

  6. What’s Worked • EaglePicher Incorporated • Situation: Financial numbers suspect, business process nonexistent, several divisions had significant operations problems, wide variances in capabilities. • Solution: Accurate numbers, operations stabilized, implementing operational plan to return business to health. Bondholders funded $50mm third lien (PIK) debt and supported a first/second lien package of $295mm. Convertible to exit financing upon emergence. This replaced all existing financing. • Result: EPI is financially solid pending emergence. We can commit to a solid growth plan with our employees and customers. All supported by the foundation of operational excellence.

  7. What’s Worked • Oxford Automotive • Situation: Weeks from running out of cash, needed months to complete $100mm transaction. • Solution: Beneficiaries of potential transaction were the existing bondholders. They funded a $100mm loan, convertible to DIP financing upon filing. This allowed the company to complete the transaction and file an orderly, pre-packaged bankruptcy • Result: No shipments missed. Oxford exited bankruptcy in four months, optimized value for impaired party.

  8. Conclusion • Plenty of funding available – for a price • Make sure you understand the entire price – are they going to support the plan or just looking to the assets? Keep your priorities in order. • Get a quick handle on the actual situation • Delay will kill you – be realistic, ask for help • Financial numbers are always suspect • Focus on fixing operations • Build credibility • Look to the sources with a vested interest in your success

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