2/20/2008
Holley Performance Products Files Bankruptcy
Holley Performance Products Inc., a specialty parts maker in the performance engine market, which includes leading brands: Holley, Weiand, Hooker, FlowTech, Earl’s, and NOS., recently filed for bankruptcy, faulting a late 1990s expansion for saddling the company with too much debt, according to a Bloomberg report.
Closely held Holley would be taken over by noteholders owed as much as $145.8 million, according to an outline of a reorganization plan filed in U.S. Bankruptcy Court in Wilmington, DE. The company, based in Bowling Green, KY, listed debts of $243 million and assets of $106 million as of Jan. 28.
Following its expansion, “Holley did not generate sufficient cash flows to support the debt incurred,'' Chief Financial Officer Thomas W. Tomlinson said in an affidavit.
Holley and four of its affiliates filed for bankruptcy protection about two years after the company renegotiated the terms on part of the 12.5 percent notes that were due last year. Holley's majority shareholder, funds managed by Kohlberg & Co., quit providing the company the cash it needed to make interest payments, according to court papers.
The reorganization will cut Holley's debt by about $100 million, according to the Bloomberg report.
Holley's 390 employees in Kentucky, California and Mississippi who make carburetor and other fuel and air-systems parts will not be affected by the bankruptcy, and, according to the company, "will continue operations as normal.”
Holley's customers include Ford Racing and GM Performance Parts. The company is a sponsor of the National Hot Rod Association and has a program that supports the National Association for Stock Car Auto Racing, according to court documents.
The company was founded in 1903 by brothers George and Earl Holley, who designed a carburetor for the Ford Model T called the Iron Pot.
Under a deal negotiated with 70 percent of the company's second-lien noteholders, Holley would pay its general unsecured creditors, such as trade vendors, in full and give almost all its equity to the noteholders, according to a description of the reorganization plan, called a disclosure statement, filed February 12.
Noteholders would get about 45.8 percent of what they're owed under the proposal, which requires a judge's approval.
Tomlinson said: “This is a prudent financial move on the part of our owner/investors – it tremendously strengthens our company’s financial position and provides substantial flexibility to invest in our future. This investment will allow the company to realize its full growth potential and will maximize the value we can return to our investors. The actual conversion of debt into equity will be accomplished through a “prepackaged” bankruptcy filing that will cancel-out the old capital structure and formally establish the new one. Customers, suppliers and employees will not be affected.”
Mr. Tomlinson emphasized: “It will be ‘business-as-usual’ at Holley throughout the restructuring process, which we expect to be completed in as few as 45 days.”