Fedders' NA Operations Files for Chapter 11
September 3, 2007
LIBERTY CORNER, N.J. - In order to facilitate a restructuring that will enable it to preserve value and continue operations, Fedders Corp.’s North American subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company will seek strategic alternatives including a sale of its business units during the reorganization process.
Fedders’ non-North American subsidiaries, which include operations in China, India, and the Philippines, were not included in the filing.
“After careful evaluation, management and the board have concluded that in order to ensure the company’s business units’ viability and growth prospects, an exploration of the sale of the company’s businesses is in the best interest of all of its constituents,” said Michael Giordano, president and CEO of Fedders. “The Chapter 11 process will allow time for prospective buyers to evaluate the company and its business units while day-to-day operations continue.”
Fedders will retain an investment bank to evaluate strategic options and will only pursue transactions that bring the greatest value, Giordano noted. It is also prepared to reorganize around its businesses and emerge from Chapter 11 protection with a new business plan should the expected proceeds from the sale of the company’s business units not bring sufficient value.
In conjunction with the filing, Fedders has obtained a $79 million debtor-in-possession financing commitment from Goldman Sachs Credit Partners L.P. The proceeds from the financing, which is subject to bankruptcy court approval, will be used to refinance the company’s senior secured revolver and term loan, to pay fees and expenses associated with the financing, and for operating expenses, including supplier obligations and employee wages, salaries, and benefits.
The company has transitioned from a manufacturer of room air conditioners only, to a manufacturer of a broad line of residential, commercial, and industrial IAQ and HVAC equipment. As part of the transition, Fedders expanded low-cost manufacturing facilities in Asia and closed underutilized U.S. factories.
“Despite previous actions we have taken to reduce costs while expanding into growing profitable markets, our existing capital structure is not in line with current revenue and profits,” said Giordano. “The action we took today is critical to ensuring continued operations while we seek the best and highest offers for the businesses we decide to sell.”
For more information, visit www.fedders.com.
Publication date: 09/03/2007