Global Fastener News

Pentacon Restructuring Advances; Q1 Revenue Down 22%

John Wolz

Pentacon Inc. announced it has signed a board-approved restructuring agreement to “significantly de-leverage the company.”
The agreement, previously announced as an agreement in principle, is with a majority of subordinated debt holders of $100 million in 12.25% senior subordinated notes due April 1, 2009. The deal would eliminate between $60 million and $65 million of debt, reducing its pro forma debt to $95 million.
The lenders would receive 90% of stock and $35 million principal of newly-issued senior notes due 2007. Stockholders would keep 10% of the total stock.
The agreement provides for an out-of-court exchange offer or a pre-negotiated Chapter 11 bankruptcy.
Pentacon is evaluating the out-of-court and Chapter 11 options. “Because of the numerous contingencies associated with an out-of-court transaction, a Chapter 11 proceeding may prove to be the most expeditious way to consummate the restructuring agreement,” according to a company statement.
The restructuring is still conditioned upon several factors, including due diligence.
Pentacon reported first quarter 2002 revenue dropped 22% from the same period last year to $55.8 million this year
EBITDA was $5 million, compared with $6.3 million for the first quarter of 2001.
Pentacon�s $25.6 million first quarter 2002 aerospace revenue was down 2% from the previous quarter and 27% from than the opening quarter of 2001. The company attributed the reduction to “lower levels of noncontract business resulting from the overall reduction in aerospace activity” due to September 11th. Aerospace operating income declined 25% from the first quarter of 2001
Industrial group revenue increased 7% from the last quarter and operating income 57% from the final quarter of 2001. Compared with 2001�s opening quarter, revenue declined $6.12 million and operating income $0.7 million. Pentacon attributed the first quarter decline to lower demand for telecommunications, power generation, heavy truck and certain transportation customers. Web: Pentacon.com �2002 FastenerNews.com