Just over one year ago, former LEDs Magazine chief editor Maury Wright spoke with Lumileds CEO Matt Roney about the LED manufacturer’s growth trajectory under challenging supply-chain conditions and application segments for the company’s future expansion. Today, the San Jose, Calif.-based lighting solutions company announced that it has entered into a restructuring support agreement (RSA) with its majority lenders in order to implement a prepackaged Chapter 11 plan.
Lumileds has conveyed in its press statement that the company “has obtained the necessary support from its lenders to confirm the Plan prior to commencing its proceedings and expects to meet the requirements to confirm the Plan and emerge from Chapter 11 within approximately sixty days.”
The Chapter 11 plan was filed with the U.S. Bankruptcy Court for the Southern District of New York. The proceedings involve only the Netherlands — where the company’s debt is held — and U.S business — where the credit agreements are held.
Under the RSA, Lumileds anticipates its funded debt to be reduced from $1.7 billion to $400 million. This includes up to $275 million of “debtor-in possession (DIP)” financing from some of its lenders to enable the company to continue operations, compensate employees, and meet financial obligations to customers, vendors, and suppliers. Within the terms of the agreement, current owner and investment firm Apollo Global Management will relinquish control of the company; creditors including Anchorage Capital Group, Nut Tree Capital Management, and Brigade Capital Management would provide the equity infusion.
In Lumileds’ press release, CEO Matt Roney emphasized the “proactive” nature of the financial restructuring and that it will help the company achieve the long-term goals and market position he outlined a year ago. “This recapitalization will enable us to further accelerate our efforts as a market-leading innovator within the specialty lighting industry,” Roney said. “We believe that the most effective and efficient way to accomplish this is through a prepackaged Chapter 11 process that will be accompanied by a significant increase in our liquidity position.”
Lumileds will continue to operate “business as usual,” moving forward with its technology development and innovation without as much interest expense looming after the Chapter 11 period ends.
According to sources, “a perfect storm” of circumstances including pandemic lockdowns, manufacturing shortages, and war between Ukraine and Russia impacting transport and supply has affected the timeline for previously discussed growth markets such as automotive LEDs to materialize.
With existing secured lenders on board to support the RSA, the plan timeline appears to be feasible. “We appreciate the support of our lenders, who recognize the long-term value and enhanced potential Lumileds will create with a strengthened balance sheet,” Roney stated in the announcement.
Lumileds' investment bank of record is Evercore, with AlixPartners serving as financial advisor, and the firms Paul, Weiss, Rifkind, Wharton & Garrison, LLP, and Lathan & Watkins LLP as corporate and restructuring counsel. The RSA and supporting documents can be accessed from Epiq Corporate Restructuring.
Updates from Aug. 31, 2022:
Lumileds has announced that the U.S. Bankruptcy Court for the Southern District of New York has provided the anticipated interim approval for the previously reported motions in its prepackaged Chapter 11 filing.
- Court granted Lumileds access to up to $275 million DIP financing
- Company operations continue as usual, with employee wages and benefits uninterrupted
- Lumileds confirms it plans to emerge from Chapter 11 within about 60 days
CARRIE MEADOWS is managing editor of LEDs Magazine, with 20 years’ experience in business-to-business publishing across technology markets including solid-state technology manufacturing, fiberoptic communications, machine vision, lasers and photonics, and LEDs and lighting.
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