CITATION CORPORATION
2700 Corporate Drive
Suite 100
Birmingham, AL 35242-2733
(205) 871-5731
Fax: (205) 870-8211
March 13, 2007
CITATION CORP. OBTAINS INVESTOR SUPPORT OF RECAPITALIZATION PLAN
BIRMINGHAM, Ala. - Citation Corp. has filed a recapitalization plan to delever its balance sheet, calling it a major step in the companys aggressive strategy to refocus operations, continue to win new business, build a strong financial base and invest in its core business segments.
This plan, which is supported overwhelmingly by more than 95 percent of those affected, is the best possible outcome for the company. The overwhelming support of our investors demonstrates the confidence they have in the future of Citation and their continued commitment to the long-term success of the company, said Ed Buker, Citations president and chief executive officer.
While the plan was filed in U.S. Bankruptcy Court late Monday to gain participation by all affected parties, Buker emphasized that it reflects far different circumstances than those leading to the companys Chapter 11 filing of September 2004.
We are in a much better position today than we were three years ago, Buker said. We have managed our costs and won record levels of new business. However, the bank agreements signed when we exited Chapter 11 in 2005 did not contemplate the unprecedented production volume cuts within the automotive industry. Our recapitalization alleviates those requirements and gives us one of the strongest financial positions in our industry.
Under the terms of the recapitalization plan, Citation will not seek concessions from its customers, and Citation intends to continue paying suppliers on normal terms. Additionally, because the plan is a pre-packaged bankruptcy meaning details of the plan have been accepted ahead of time by Citations major affected constituencies the company expects to complete the court process in 30 to 60 days, compared to the six- to 12-month process for a typical Chapter 11.
Citations plan will convert $160 million of the companys approximately $190-million term debt to 100 percent of the common equity with the remaining $30 million of debt converted into PIK debt that does not mature until 2013. The interest on this debt will be payable in kind, meaning interest is not paid in cash but rather accrues and is paid when the debt finally matures. Citations existing asset-based revolving line of credit will continue under the same terms that currently exist. Finally, Citation's existing preferred and common equity holders will receive warrants in the new company.
Over the last year, we have had tremendous success in reducing costs within our plants, Buker said. Weve focused on business that can be profitable, and weve won significant new business in our core segments. Weve closed two unprofitable plants and sold two others that were no longer a good fit for us. We have a strategic plan that is working, and this recapitalization will give us the strong financial base we need to see it through.
Citation is a privately held corporation headquartered in Birmingham, Alabama. Through its subsidiaries, the company designs, develops and manufactures high-quality cast and machined components for market segments including the automotive, heavy truck, construction, agricultural and commercial industries.
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For more information, contact Gene Monteith, Cochran Group Inc., at 614\224-0600, Ext. 312