Troubled supplier Breed Technologies Inc. has convinced its lenders to allow an additional three months to get its financial house in order, a significant challenge given its massive debt load — totaling $898 million at the end of fiscal 1998.
Breed's 1999 fiscal year ended June 30, but it will be at least a month before results are disclosed. The company reported net losses of $368 million for all of 1998 and $234 million so far in fiscal 1999.
But Breed may have managed to slow the flow of red ink in the last quarter, as lenders, after meeting with Breed management last week, offered a vote of confidence by allowing until Oct. 12 for Breed to meet its financial obligations. The last deadline was June 29.
However, there are strings attached, including higher interest rates and additional lenders' fees. Plus, Breed must launch a “capital transaction program to explore strategic alternatives for the business.”
The waiver allows Breed to use proceeds from the sale of certain assets for general corporate purposes, rather than debt repayment. Breed also has hired investment banker Wasserstein Perella & Co. of New York to advise on a capital transaction program.
Analysts have speculated that the air bag system supplier is ripe for takeover by its joint venture partner, Siemens AG, orAutomotive Systems (see Ward's Automotive Reports — June 14, '99, p.3).
Breed's struggles are a bit puzzling in that it already has eliminated 5,000 workers and closed or sold 45 facilities. And Breed Siemens Restraint Systems, which makes up the bulk of Breed's sales, has landed six major contracts, the first beginning production in 2001.
Asked about a potential acquisition, a Siemens Automotive spokesman says Breed, as a mechanical component supplier, remains outside Siemens' core focus of automotive electronics.