Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Exide Technologies Considering Bankruptcy Amid Regulatory Scrutiny
Author: Joel R. Glucksman
Date: June 20, 2013
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Car- and battery-maker Exide Technologies is considering bankruptcy protection under Chapter 11 this summer, sources familiar with the company told the Wall Street Journal.
The company is due to make a $56 million payment in September, but has faced shrinking profitability as a result of higher-than-expected restructuring expenses, reduced demand in a number of markets, and higher lead-input costs, the Journal reports. Adding to the company’s financial strain is the reputational damage suffered to its brand after allegations of violating state environmental laws came to light. Scrutiny from regulators at its Vernon, California, facility forced the division to suspend operations while investigators explore potentially hazardous lead and arsenic emissions at the battery recycling facility, CBS reports. The California Department of Toxic Substances Control, which ordered the shut-down, said it is unsure how long the suspension will remain in place.
The investigation highlights several earlier reports that indicate Exide’s faulty operation of its storm-water system may have violated state laws for several years. The findings of a 2007 report conducted by the California Regional Water Quality Control Board “suggest that in the last three years, Exide has contributed through deposition approximately 424 lbs. of lead in both 2004 and 2005 and 712 lbs of lead in 2006 to the watershed,” CBS notes.
The company’s plan to seek bankruptcy law protection will likely not include its European operations, which represent more than 50 percent of the Exide’s revenue, a source close to the matter told the newspaper. However, Exide noted that it is “evaluating its legal and regulatory remedies” to help it get out from under $700 million in debt. Creditors have already expressed concerns that the company will be unable to make its debt payment in September, the Journal reports.
Exide Technologies currently provides batteries to auto makers, parts suppliers, and retailers throughout the U.S., and recently expanded operations after receiving a $34 million matching grant in late 2009 from the Department of Energy.
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