Lenders to American Axle & Manufacturing Holdings Inc. (AXL)
have agreed to an amendment and waiver on its revolving credit
facility, giving the company until the end of the month to meet
terms on the debt.
The loan was previously renegotiated last November, and the
latest waiver runs through July 30, the company said in a
Securities and Exchange Commission filing Tuesday.
During the waiver period, the firm must maintain daily minimum
liquidity of $100 million, according to the filing. It is also
limited in its ability to incur or repay debt, make restricted
payments and make investments.
American Axle, which makes axles for General Motors Corp.
(GMGMQ), had about $280 million of liquidity, consisting of
available cash, short-term investments and committed borrowing
capacity on its revolver, according to the filing.
JPMorgan Securities Inc. and Banc of America Securities LLC are
lead arrangers on the loan. Justin Perras, a spokesman for JPMorgan
declined to comment. Banc Of America spokeswoman Louise Hennessy
also declined to comment. Lenders were paid a 25 basis points fee
to agree the waiver.
Chris Son, a spokesman for American Axle, did not comment
further on the amendment and waiver.
The borrowing capacity under the revolver stands at $476.9
million through April 2010 and at $369.4 million through December
2011, according to Standard & Poor's LCD unit. As at the end of
March, American Axle had $174.7 million available under the
revolver, according to LCD.
The company previously amended the revolver in November,
extending the maturity of a portion of the facility to December
2011 from April 2010.
It was in compliance with covenants on the revolver at the end
of March, but auditors warned that the company might not be able to
continue as a going concern.
Lenders to American Axle include Wachovia, BNP Paribas, KeyBank,
SunTrust, Bank of China, HSBC, Commerzbank, U.S. Bank, Comerica
Bank, National City Bank, Bank of Tokyo-Mitsubishi, Bank of Nova
Scotia, Bank of New York Mellon and Merrill Lynch Bank, according
to the filing.
American Axle relies on GM for about 75% of its revenue. The
company continues to be rocked as GM, which filed for bankruptcy
protection June 1, slices production amid a worldwide recession
that has pushed auto sales to historic lows.
JPMorgan analysts Himanshu Patel and Ryan Brinkman believe
bankruptcy for American Axle is possible, if not imminent. In a
note to clients Monday, the analysts listed three possibilities for
the company: covenant extensions, aid from General Motors and
American Axle Chief Executive Dick Dauch fighting to avoid Chapter
11.
Kip Penniman, an analyst at KDP Investment advisors, believes it
is unlikely that the company will pay the upcoming coupons due
August 11 and September 1 on its bonds. This would result in a
default, Penniman said in a note to clients Tuesday.
"From today's vantage point, it appears unlikely that Axle will
pay its bond coupons due on 8/11 and 9/1 and we expect the company
will file for bankruptcy," Penniman wrote.
Penniman estimates that if American Axle were to file for a
traditional Chapter 11 bankruptcy, unsecured bondholders could
recover anything from 18 cents to 41 cents on the dollar, with the
recoveries paid in the form of equity in the reorganized entity.
Bondholders could recover around 40 cents on the dollar in a
pre-packaged bankruptcy, representing a majority stake in the
equity of the reorganized entity, Penniman said.
The company has about $1.1 billion of debt on its balance sheet
and about $770 million of retiree-related liabilities as at the end
of December 2008, according to Penniman.
American Axle's waiver comes as Lear Corp. (LEAR), a maker of
automotive seats and electronics, became the latest supplier to
file for bankruptcy protection.
Eight major suppliers have filed for bankruptcy, including big
names such as Delphi Corp. (DPHIQ) and Collins & Aikman Corp.
The number increases to more than a dozen when expanded to smaller
or privately owned suppliers.
American Axle's 5.25% bonds due 2014 were lower in light trade
Tuesday, according to online trading platform MarketAxess, which is
showing quotes at 28 cents on the dollar.
The company's shares were recently down 51 cents, or 18%, at
$2.33.
Son, the company's spokesman, indicated that it expects to
announce its second-quarter earnings at the end of July.
-By Kate Haywood, Dow Jones Newswires; 212-416-2218;
kate.haywood@dowjones.com
(Jeff Bennett in Detroit and Geoffrey Rogow contributed to this
report.)