Files Voluntary Chapter 11 Petitions to
Facilitate Transaction
Secures $23.5 Million in DIP Financing to
Support Operations
Company to Continue Providing Customers with
Lightweighting, Noise & Vibration Solutions
Shiloh Industries, Inc. (NASDAQ: SHLO) (the “Company” or
“Shiloh”) an environmentally focused global supplier of
lightweighting, noise and vibration solutions, announced today that
it has entered into a stalking horse stock and asset purchase
agreement with Grouper Holdings, LLC (“Grouper”), a subsidiary of
MiddleGround Capital LLC (“MiddleGround”) pursuant to which Grouper
will acquire substantially all of the Company’s assets, including
the equity interests of certain of the Company’s direct and
indirect subsidiaries for an aggregate consideration of $218
million in cash, subject to working capital and net debt
adjustments, and assumption of certain liabilities of the
Company.
To facilitate the transaction process, the Company and certain
of its U.S. subsidiaries today filed voluntary petitions (the
“Bankruptcy Petitions,” and the cases commenced thereby, the
“Chapter 11 Cases”) for reorganization under Chapter 11 of the
Bankruptcy Code in the U.S. Bankruptcy Court for the District of
Delaware. MiddleGround, via Grouper, will serve as the “stalking
horse bidder” in a court-supervised auction and sale process.
Accordingly, the proposed transaction with MiddleGround is subject
to higher or otherwise better offers, Court approval and other
customary conditions. The Company’s operating entities outside the
U.S., while included in the agreement with MiddleGround, are not
part of the court-supervised process, and its operations in Asia,
Europe and Mexico are expected to continue as normal.
The Company’s operations will continue throughout the sale
process and the Company will continue to meet customers’ needs. In
conjunction with the proposed sale transaction, the Company has
received a commitment for $123.5 million in debtor-in-possession
(“DIP”) financing from its existing lenders, consisting of
approximately $23.5 million new money subfacility and a roll-up of
approximately $100 million of commitments under the Company’s
existing revolving credit facility. Upon Court approval, this new
financing, combined with cash generated from the Company’s ongoing
operations, is expected to be used to support the business
throughout the sale process as Shiloh continues to take steps to
address the ongoing challenges related to OEM production shutdowns
due to COVID-19 that have affected the automotive sector in recent
months.
“MiddleGround’s interest in Shiloh is a testament to the value
they see in the highly competitive and universally innovative
solutions we provide to our customers, driven by our hardworking,
dedicated team,” said Cloyd J. Abruzzo, Interim chief executive
officer of Shiloh. “The decision to enter this agreement with
MiddleGround follows a thorough review of the options available to
us, and we believe this transaction is the best path forward for
Shiloh and all of our stakeholders. We look forward to building on
our unique strengths as part of MiddleGround, while improving
Shiloh’s financial position for the long term. In the meantime, we
continue to work to promote safety and meet customer demand as the
automotive industry recovers from the COVID-19 pandemic. We
appreciate the support of our customers, partners, and above all,
our employees as we take these important steps to position Shiloh
for the future.”
“Shiloh has a unique and attractive portfolio of innovative,
lightweighting products and technologies that enable OEMs to reduce
on-vehicle weight without compromising strength, safety or
performance,” said John Stewart, Partner at MiddleGround. “Despite
recent market conditions, we see tremendous value in Shiloh’s
business and differentiated product solutions serving the
automotive sector. We look forward to working with the Shiloh team
in this new chapter for the Company.”
In conjunction with the Chapter 11 filing, the Company has filed
a number of customary motions with the Court seeking authorization
to continue to support its operations during the court-supervised
sale process, including authority to continue payment of employee
wages and benefits without interruption and to honor customer
commitments.
Additional information is available on Shiloh’s restructuring
website at www.shilohrestructuring.com, or by calling
Shiloh’s Restructuring Hotline at (877) 462-4380 (toll-free in the
U.S. and Canada) or (347) 817-4091 (for calls originating outside
the U.S. and Canada). Court documents and additional information
about the court-supervised process are available on a separate
website administered by Shiloh’s claims agent, Prime Clerk, at
https://cases.primeclerk.com/shiloh.
The Company cautions that trading in its securities during the
pendency of the Chapter 11 Cases is highly speculative and poses
substantial risks. Trading prices for these securities may bear
little or no relationship to the actual recovery, if any, by the
holders in the Chapter 11 Cases. The Company expects that its
stockholders could experience a significant or complete loss on
their investment, depending on the outcome of the Chapter 11
Cases.
Jones Day is serving as legal counsel to Shiloh, Houlihan Lokey
Capital Inc. is serving as financial advisor, and Ernst & Young
LLP is serving as restructuring advisor. Baker McKenzie LLP is
serving as legal counsel to MiddleGround.
Investor Contact:
For inquiries, please contact our Investor Relations department
at 1-646-378-2986 or at investors@shiloh.com.
Media Contact:
For inquiries, please contact Hilary Brazin at 1-734-738-1362 or
at hilary.brazin@shiloh.com
or
Joele Frank, Wilkinson Brimmer Katcher Andy Brimmer / Michael
Freitag / Andrew Squire 212-355-4449
About Shiloh Industries, Inc.
Shiloh Industries, Inc. (NASDAQ: SHLO) is a global innovative
solutions provider focusing on lightweighting technologies that
provide environmental and safety benefits to the mobility market.
Shiloh designs and manufactures products within body structure,
chassis and propulsion systems. Shiloh’s multicomponent,
multi-material solutions are comprised of a variety of alloys in
aluminum, magnesium and steel grades, along with its proprietary
line of noise and vibration reducing ShilohCore® acoustic laminate
products. The strategic BlankLight®, CastLight® and StampLight®
brands combine to maximize lightweighting solutions without
compromising safety or performance. Shiloh has approximately 3,450
dedicated employees with operations, sales and technical centers
throughout Asia, Europe and North America.
About MiddleGround Capital
MiddleGround Capital is a private equity firm that makes control
equity investments in lower middle market North American companies
in the B2B industrial and specialty distribution sectors.
MiddleGround works with its portfolio companies to create value
through a hands-on operational approach and partners with its
management teams to support long-term growth strategies.
MiddleGround is currently investing out of its first fund and
headquartered in Lexington, KY with a second office in New York
City. For further information, please visit: www.middlegroundcapital.com.
Forward-Looking Statements
All statements contained in this press release that are not
historical facts are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The forward-looking
statements are made on the basis of management’s assumptions and
expectations. As a result, there can be no guarantee or assurance
that these assumptions and expectations will in fact occur. The
forward-looking statements are subject to risks and uncertainties
that may cause actual results to materially differ from those
contained in the statements due to a variety of factors, including
(1) the duration and severity of the COVID-19 pandemic, any
preventive or protective actions taken by governmental authorities,
the effectiveness of actions taken globally to contain or mitigate
its effects, and any unfavorable effects of the COVID-19 pandemic
on either the Company’s manufacturing operations, or those of its
customer’s or suppliers; (2) reduction in demand for the Company’s
solutions, including any reduction in demand as a result of a
COVID-19 triggered economic recession, including any determination
that the value of its assets is impaired or that it does not have
the ability to continue as a going concern; (3) the Company’s
ability to accomplish its strategic objectives; (4) the Company’s
ability to obtain future sales; (5) changes in worldwide economic
and political conditions, including adverse effects from terrorism
or related hostilities; (6) costs related to legal and
administrative matters; (7) the Company’s ability to realize cost
savings expected to offset price concessions; (8) the Company’s
ability to successfully integrate acquired businesses, including
businesses located outside of the United States; (9) risks
associated with doing business internationally, including economic,
political and social instability, foreign currency exposure and the
lack of acceptance of the Company’s products; (10) inefficiencies
related to production and product launches that are greater than
anticipated; (11) changes in technology and technological risks;
(12) work stoppages and strikes at the Company’s facilities and
that of its customers or suppliers; (13) the Company’s dependence
on the automotive and heavy truck industries, which are highly
cyclical; (14) the dependence of the automotive industry on
consumer spending, which is subject to the impact of domestic and
international economic conditions affecting car and light truck
production; (15) regulations and policies regarding international
trade; (16) financial and business downturns of the Company’s
customers or vendors, including any production cutbacks or
bankruptcies; (17) increases in the price of, or limitations on the
availability of aluminum, magnesium or steel, the Company’s primary
raw materials, or decreases in the price of scrap steel; (18) the
successful launch and consumer acceptance of new vehicles for which
the Company supplies parts; (19) the impact on financial statements
of any known or unknown accounting errors or irregularities, and
the magnitude of any adjustments in restated financial statements
of the Company’s operating results; (20) the Company’s ability to
obtain Bankruptcy Court approval with respect to motions in the
Chapter 11 Cases; (21) the effects of the Chapter 11 Cases on the
Company and on the interests of various constituents; (22)
potential delays in the Chapter 11 process due to the effects of
the COVID-19 virus; (23) objections to the Stock and Asset Purchase
Agreement, DIP Credit Agreement or other pleadings filed that could
protract the Chapter 11 Cases; (24) the Bankruptcy Court’s rulings
in the Chapter 11 Cases, including the approvals of the terms and
conditions of, and the transactions contemplated by, the Stock and
Asset Purchase Agreement and the DIP Credit Agreement (25); the
outcome of the Chapter 11 Cases in general; (26) the length of time
the Company will operate under the Chapter 11 Cases; (27) risks
associated with third-party motions in the Chapter 11 Cases; (28)
the potential adverse effects of the Chapter 11 Cases on the
Company’s liquidity or results of operations and increased legal
and other professional costs related to the Chapter 11 Case; (29)
the ability of the Company to meet the closing conditions and
successfully consummate the Stock and Asset Purchase Agreement;
(30) employee attrition and the Company’s ability to retain senior
management and other key personnel due to the distractions and
uncertainties; (31) the trading price and volatility of the
Company’s common stock and the ability of the Company to remain
listed on The NASDAQ Global Select Market; (32) increases in
pension plan funding requirements; (33) the Company’s ability to
derive a substantial portion of its sales from large customers;
(34) a successful transition of the CEO position and the Company’s
ability to successfully identify a qualified and effective
full-time CEO; and (35) other factors besides those listed here
could also materially affect the Company’s business. See (a) “Part
I, Item 1A. Risk Factors” in the Company’s Annual Report on Form
10-K for the fiscal year ended October 31, 2019 and (b) Part II,
Item 1A. Risk Factors” in the Company’s Quarterly Reports on Form
10-Q for the fiscal quarters ended January 30, 2020 and April 30,
2020 for a more complete discussion of these risks and
uncertainties. Any or all of these risks and uncertainties could
cause actual results to differ materially from those reflected in
the forward-looking statements. These forward-looking statements
reflect management’s analysis only as of the date of this press
release. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances
that arise after the date of this press release. In addition to the
disclosures contained herein, readers should carefully review risks
and uncertainties contained in other documents the Company files
from time to time with the Securities and Exchange Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200830005020/en/
Investor Contact: Investor Relations Department
1-646-378-2986 investors@shiloh.com
Media Contact: Hilary Brazin 1-734-738-1362
hilary.brazin@shiloh.com or Joele Frank, Wilkinson Brimmer Katcher
Andy Brimmer / Michael Freitag / Andrew Squire 212-355-4449
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