CITATION CORPORATION
2700 Corporate Drive
Suite 100
Birmingham, AL 35242-2733
(205) 871-5731
Fax: (205) 870-8211
March 14, 2007
Citation Gains Interim Approval to Continue Ordinary Course of Business - Confirmation of Final Recapitalization Plan Scheduled for April 5, 2007
BIRMINGHAM, Ala. - A federal judge has approved motions that will allow Citation Corporation to continue business in the normal course pending approval of a recapitalization plan designed to significantly improve the companys balance sheet.
Judge Tamara O. Mitchell, ruling Tuesday in the U.S. Bankruptcy Court for the Northern District of Alabama, agreed with Citation that there was no need to seek concessions from suppliers or customers.
Citation was granted the ability to pay all unsecured creditors in normal course including its employees, suppliers and benefits carriers. It was also granted the ability to accept existing contracts with customers. A DIP financing facility of $25 million was also approved to be used should the cash on hand not be adequate during the process. Citation has significant cash on hand from two recent strategic divestitures.
The only parties impaired by our plan are the lenders and shareholders, and they overwhelmingly (95+%) are in favor of the plan, said Ed Buker, Citations President and CEO.
While the plan was filed in U.S. Bankruptcy Court late Monday to gain participation by all impaired parties, Buker stressed that the filing represents a dramatically different process from the restructuring of the company that occurred after Citations 2004 Chapter 11 filing.
This affects our balance sheet only, greatly reducing our debt and interest expense giving us an enviable financial position within our industry, Buker said. This plan represents the missing piece in our continuing progress since we exited Chapter 11 in 2005.
Buker noted that the company has significantly reduced internal costs and met record sales marks across all business segments in the past two years. However, the bank agreements signed when the company exited Chapter 11 2005 did not contemplate the unprecedented production volume cuts within the automotive industry.
The plan filed Monday will convert approximately $160 million of the companys approximate $190-million term debt to 100 percent of the new common equity with the remaining $30 million of debt converted into PIK debt that does not mature until 2013. Citations existing asset-based revolving line of credit will be amended and restated using essentially the same terms that currently exist. Finally, Citation's existing preferred and common equity holders will receive warrants in the new company.
Because the plan is a pre-packaged filing meaning details of the plan have been accepted ahead of time by Citations major impaired constituencies the company expects to complete the court process with a confirmation hearing on April 5, 2007.
Citation is a privately held corporation headquartered in Birmingham, Ala. 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