Proliance, Silver Point Finance reach agreement

Jan. 1, 2020
Proliance International, Inc. has entered into a new credit agreement with Silver Point Finance, LLC. Charles E. Johnson, president and CEO of Proliance, recently announced the agreement, which was entered into on July 19.
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Proliance International, Inc. has entered into a new credit agreement with Silver Point Finance, LLC.

Charles E. Johnson, president and CEO of Proliance, recently announced the agreement, which was entered into on July 19.

The $100 million senior secured credit facility, led by Silver Point and including Wachovia Capital Finance Corporation (New England) as a participant, includes a $50 million term loan, and the balance in the form of a revolving loan, which will fluctuate based on asset levels and performance of the company.

"We are pleased to announce that we have entered into a new credit agreement," Johnson says. "This refinancing of our current debt increases our borrowing capacity and expands our financial resources. It also provides us with the financial flexibility to take the actions necessary to improve our business performance."

As part of the refinancing, the company will incur one-time debt extinguishment costs of approximately $2 million in the third quarter of 2007. This credit agreement will replace the company's current $88 million credit facility with Wachovia, as agent, and provide additional liquidity to fund day-to-day operations, while also providing cash resources to take appropriate steps to right size the infrastructure of the business and improve operating results.

"Preliminary results in the second quarter show lower sales due to the late arrival of seasonal business activity, as well as a continuation of adverse trends we have described in the past, and we now anticipate results from operations for the full year will be lower than previously anticipated," Johnson adds. "Accordingly, we are taking additional steps in the third and fourth quarter to reduce our cost structure and right-size our business operations to improve bottom line performance."

While Proliance had previously set an objective to achieve profitability for the full year 2007, it now expects a 2007 net loss of between $12 million and $17 million primarily attributable to charges associated with the recently-disclosed arbitration decision ($3.2 million in the second quarter), debt extinguishment costs ($2 million) and restructuring expenses of $5 million to $7 million over the course of the year. These restructuring charges represent a $3 million to $4 million increase in restructuring activity from prior guidance of $2 million to $3 million (of which about $1.3 million has been incurred in the first six months of 2007).

The company currently is finalizing and acting upon a broad range of strategic actions to right size its operational and administrative structure going forward. This, as well as initiatives to lower unit costs while maintaining high product quality, will better position Proliance to achieve its financial targets should unfavorable market trends continue to negatively impact sales and margins of heat exchange and temperature control products, according to the company.

It says these restructuring charges will include a number of immediate actions to change the company's "go-to-market" strategy through its branch operations, which will further reduce branch operating costs while also enhancing the company's capability to effectively service its local customers. In addition, it will be further rationalizing its overhead structure in North America. These actions should reduce the U.S. salaried workforce by approximately 15 percent and streamline distribution and manufacturing facilities in North America to further reduce operating and product costs, according to the company.

"While we are disappointed that we will not achieve our goal of profitability this year, we believe our restructuring strategy will mitigate some of the adverse trends we have been facing in the market, leaving us better positioned for future success," Johnson says. "We also believe that we are improving operational efficiency for our company while continuing to serve our customers needs with the highest quality of products and services. The actions we announced today will help position us for profitability before restructuring and debt extinguishment expenses for the second half of 2007 and for improved financial performance in the coming years."

Proliance International, Inc. is a global manufacturer and distributor of aftermarket heat exchange and temperature control products for automotive and heavy-duty applications serving North America, Central America and Europe.

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