Automotive component supplier Accuride filed for bankruptcy protection

February 09, 2023

On the evening of October 8, Beijing time, Accuride Corp, a commercial vehicle component manufacturer, filed for bankruptcy protection. The company announced that it has reached an agreement with creditors to transfer most of the company’s ownership to bondholders.
Accuride supplies components for automotive brands such as Freightliner, Peterbilt, International, Great Dane, and Mack. The company pointed out this morning that the restructuring plan will delay the expiration date of the bank loan, which is worth about US$300 million, and reset its interest rate.
In addition to acquiring the company’s current 98% stake, bondholders are also granted another power: they can purchase new bonds worth US$140 million. These bonds are convertible bonds and can convert 60% of the company’s shares in the future.

Half of the proceeds from the sale of new bonds will be used to repay loans owed to Sun Capital. Sun Capital is a private equity investment company and currently owns approximately 30% of Accuride. Earlier this year, Sun Capital acquired these shares and provided a loan to Accuride, which also owns half of Accuride's board of directors.

Accuride’s current shareholders will receive a 2% stake and they will also receive a warrant: They can own 15% of the new company in the future. In bankruptcy protection, Accuride’s creditors will provide 50 million US dollars in bankruptcy protection financing (DIP) to help Accuride maintain daily operations.

In the bankruptcy protection application, Accuride, based in Evansville, Indiana, stated that the company and its 20 subsidiaries had a total of $682.3 million in assets and debt totaling $847 million. Accuride’s Mexican and Canadian subsidiaries are not included in this bankruptcy protection.

Accuride was founded in 1986 when the company acquired a division of Firestone Tire & Rubber. Accuride has since grown through acquisitions and currently employs 2,266 people in 15 factories. However, like many competitors, this company has suffered a severe shock from the economic downturn in the past two years.

Accuride’s CFO James Woodward pointed out in the filing of the bankruptcy court that the company’s problems started in 2007, when the government passed new environmental regulations that contained the market’s demand for trucks, and since then the US economy in 2008. Into the recession, leading to a large excess of capacity in the automotive industry. Woodward said that the demand for new commercial vehicles is expected to decline for the third consecutive year in 2009, and the total demand will fall to the lowest point since 1982.

Last year, Accuride’s sales fell to US$931.4 million, which was significantly lower than the peak value of US$1.4 billion hit in 2006. Accuride lost a total of 328.3 million U.S. dollars last year, compared with 65.1 million U.S. dollars in 2006.

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Author:

Mr. Liu Keda

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