Here's the press release from Holley. Although they've filed for Chapter 11 "restructuring" they haven't stated plans to close the doors.
Bowling Green-based Holley Performance Products Inc. filed for chapter 11 bankruptcy Tuesday.
Customers, suppliers and its more than 600 employees - about 375 in Bowling Green - will not be affected, according to Holley Chief Financial Officer Tom Tomlinson, who also said the restructuring plan approved by the company’s owners and investors is expected to be confirmed at a hearing March 19.
“We have all the cash and liquidity we need to pay vendors, and we will continue to honor our arrangements with customers,” Tomlinson said this morning. Operations are profitable and the company will carry on with “business-as-usual” throughout the restructuring process, which should be completed within 45 days, he said.
Holley specializes in performance engine parts with products used throughout the world in racing, street, marine and powersports.
Holley began planning its restructuring in 2002, when the company saw solid earnings growth that was overshadowed by its debt of the late 1990s - a time when the company expanded its vision beyond manufacturing fuel systems.
After Holley was acquired by a private equity firm in the late 1990s, it went on a buying spree, completing a series of acquisitions to add additional automotive lines - Weiand, NOS, FlowTech, Earl’s and Nitrous Oxide Systems, according to Tomlinson. Holley’s Nitrous Oxide Systems, Weiand and Holley products are made in Bowling Green.
“The debt is from those acquisitions and the period after those acquisitions in which the company was running in a way that was cash-flow negative,” Tomlinson said.
The actual conversion of debt into equity is being accomplished through the “prepackaged” bankruptcy filing that cancels out Holley’s old capital structure and formally establishes the new one, according to Holley, with all of its creditors consenting to the bankruptcy.
After the restructuring, Holley’s debt levels will improve, Tomlinson said, from its historically over-leveraged position in the past decade.
Calling Holley a “lean and focused enterprise with strong customer relationships, significant technological capabilities and diversified revenue sources,” Holley CEO James D. Wiggins said in a news release that the company has established a good track record of profitability and growth.
As the restructuring frees up Holley’s cash flow and significantly reduces the amount of interest it pays to service its debt, the company says it is poised to take advantage of growth opportunities.
Tomlinson said more acquisitions are likely to be considered.
“Obviously, we’re going to look for the right opportunities and proceed cautiously,” Tomlinson said. “We’re always looking for what is the next stage for Holley.”
Here's the key phrase:
"The actual conversion of debt into equity is being accomplished through the “prepackaged” bankruptcy filing that cancels out Holley’s old capital structure and formally establishes the new one, according to Holley, with all of its creditors consenting to the bankruptcy."
Keep an eye on their common stock. If you own some...well, it might become worthless paper like K-Mart did as a part of that little trick of "canceling out the old capital structure." In my eyes this is nothing short of legalized theft.
RtR
