5 September 2022
Lumileds’ lenders agree debt reduction of $1.3bn, and $275m in loans
LED product and lighting maker Lumileds Holding B.V. has entered into a restructuring support agreement (RSA) with its major lenders to significantly de-leverage and strengthen its balance sheet by over $1.3bn (from about $1.7bn to $400m), consisting of takeback debt and post-petition loans, which will be combined into a five-year exit facility. Specifically, the agreement involves the injection of up to $275m of liquidity in debtor-in-possession (DIP) financing from certain lenders, in order to “accelerate the firm’s growth and enable further investment in innovation to pursue additional strategic opportunities”.
To efficiently implement the de-leveraging, a pre-packaged Chapter 11 plan involving only Lumileds’ US and Dutch entities was filed on 29 August in the US Bankruptcy Court for the Southern District of New York. Lumileds’ European, Asian and other foreign subsidiaries and affiliates were not included in the filing and are unaffected.
On 30 August, Lumileds received interim approval from the court for all the ‘first day’ motions related to the pre-packaged Chapter 11 filing. The approved motions immediately solidify the company’s liquidity position and maintain global operations in their normal course throughout the financial restructuring.
As part of these motions, the court granted Lumileds access to the $275m DIP financing that, together with available cash reserves and cash provided by operations, should provide sufficient liquidity for Lumileds to continue meeting its ongoing obligations.
Specifically, Lumileds says that it will continue to deliver products and services to customers. The firm’s vendors and suppliers will not be impaired and will be paid for all valid amounts owed as they come due. Also, employees will continue to receive their usual wages and benefits without interruption.
“Over the past few years, we have been hard at work transforming our cost structure and innovation pipeline, which has allowed us to capitalize more effectively on future market trends as a leader in the lighting industry,” says Lumileds’ CEO Matt Roney. “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. This recapitalization will enable us to further accelerate our efforts as a market-leading innovator within the specialty lighting industry,” he adds. “The most effective and efficient way to accomplish this is through a prepackaged Chapter 11 process that will be accompanied by a significant increase in our liquidity position. We appreciate the support of our lenders, who recognize the long-term value and enhanced potential Lumileds will create with a strengthened balance sheet.”
“The approval of our first day motions is an important milestone in our recapitalization and financial restructuring efforts, which will allow us to operate in the normal course as we de-leverage our balance sheet and further position Lumileds to capture opportunities in the market and accelerate our growth,” says Roney.
Lumileds expects to meet the requirements to emerge from the Chapter 11 process within about 60 days.