Milwaukee-based Jason Industries Inc. plans to seek Chapter 11 bankruptcy protection as part of a restructuring agreement reached with some of its senior secured lenders.
Jason ended 2019 with nearly $379 million in debt and around $85 million in cash and cash equivalents. The restructuring plan will ultimately deleverage Jason’s balance sheet by $250 million.
The company anticipates emerging from bankruptcy as a private enterprise and equity holders would not receive a recovery, according to a Jason Industries press release. Vendors, suppliers and customers would be unaffected by the agreement and the plan calls for no impairment to unsecured trade creditors, the release said.
Federal court records did not show a bankruptcy filing for Jason as of Monday morning. The agreement calls for the company to file for Chapter 11 on the 12th business day after signing the agreement. The deal was announced on Friday.
Brian Kobylinski, chief executive officer of Jason, said the company had worked hard in recent years to simplify its business, improve operational performance, enhance customer relationship and transform its portfolio. The transformation included the sale of its fiber solutions business, Janesville Acoustics, for $85 million last year. This spring, Jason sold its Metalex business for $5 million.
“Unfortunately, we were not able to realize the full benefits of these actions, the newly secured platforms and cost-reduction initiatives prior to the impact of the COVID-19 global pandemic, which weakened demand, disrupted our supply chain and forced us to temporarily close many of our plants,” Kobylinski said.
Jason is the parent company of two manufacturing brands. Its only local operation is Milsco, which makes more than 3 million seats annually for the motorcycle, powersport, construction, agriculture and material handling markets. Jason also makes standard and customized brush, polishing and abrasive products under the Osborn name for the aerospace, automotive, construction, engineering, plastic, steel, hardware, welding and shipbuilding industries.
In April 30 financial projections, disclosed as part of the restructuring process, Jason estimated Milsco revenues would be down 22.7% from last year to $105.4 million. Osborn revenues were projected to decrease 16.2% to $168.9 million.
The company also estimated an 83.5% drop in adjusted EBITDA to $4.1 million for the entire organization. The projection included a drop in Milsco margins from 11.1% to 5.2% and Osborn margins declining from 10.4% to 5.5%.
“We remain confident in the underlying strength and direction of our two businesses and are taking this step to directly address our balance sheet so that we are positioned to better serve our customers and realize Jason’s full potential,” Kobylinski said.
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