Metaldyne Inc.

Background

Metaldyne was a leading $900 million global supplier of metal-formed components and assemblies for engines, transmissions and chassis. It is the world leader in powder metal forging connecting rods.

The company suffered from high exposure to the North American auto market and had insufficient cash flow projections to service its substantial debt ($921M) and pension obligations.

The Project

Zolfo Cooper was engaged by the term loan lenders in October 2008 to:

  • Review Metaldyne’s business plan and evaluate both in- and out-of-court restructuring proposals.
  • Evaluate company’s performance improvement initiatives and liquidity.
  • Monitor the negotiations with the OEMs and ensure that the senior lenders’ leverage points were not impaired.

Outcome

Key accomplishments:

  • Identified significant issues with Metaldyne’s liquidity and encouraged management to assess ways to increase cash infusion for operational needs and to develop contingency plans for a bankruptcy filing.

  • Assisted the lenders to structure the agreements with customers, Metaldyne, and equity sponsor for a $120M million infusion from the sponsor and OEMs.

  • Evaluated the risk of resourcing of the products.

  • Participated in negotiations with Ford, GM, and Chrysler and ensured that the OEM agreements would not jeopardize the term loan lenders’ collateral.

  • Monitored company performance and industry dynamics.

  • Estimated funding needs to recapitalize the Company and maximize recoveries to the lenders.

  • Completed optimization analysis to evaluate restructuring alternatives and supported the lenders in their evaluation of a credit bid (Section 363 sale of the company) by conducting due diligence, evaluating offers from interested parties and advising on structure of the credit bid and alternative transactions.

A successful credit bid was made by the lenders, including the investment of up to $100 million of new money to support repayment of senior obligations and capitalize the NewCo, carrying a substantially reduced debt load.