Spectrum brands files Chapter 11

Atlanta-based consumer products company Spectrum Brands Inc. on Tuesday filed for Chapter 11 reorganization, unable to make a $25.8 million interest payment on its debt.
The company said it is $4.4 billion in debt.
Spectrum said it inked agreements with noteholders that represent 70 percent of the face value of its outstanding bonds to pursue a refinancing that could cut its outstanding debt and put it in a stronger financial position for the future. A refinancing would let the company slash the amount of debt on its balance sheet by $840 million (or about 33 percent), eliminate $95 million in annual cash interest payments for at least each of the next two years and free up additional cash to reinvest in its business.
The refinancing would come through the cancellation of $1.05 billion in existing bond obligations and the issuance of new bonds in an amount equal to 20 percent of the total unpaid principal and interest on existing bonds together with shares of new common stock to be created under the plan. Existing common stock would be extinguished and no distributions will be made to holders of the current equity.
The restructuring would take four to six months, Spectrum said.
Spectrum Brands has landed commitments for $235 million in debtor-in-possession financing from some existing lenders with a participating interest from some existing noteholders.
"Our businesses have attractive growth prospects that have been encumbered by the level of debt the parent company is carrying,” said Kent Hussey, CEO of Spectrum Brands, in a prepared statement. “After careful consideration, we decided that the approach announced today would be the most effective and expedient path for us to develop a more appropriate capital structure to support our long-term business objectives. We estimate that when this refinancing has been completed, the company will generate in excess of $100 million in annual free cash flow."
Spectrum ended fiscal 2008 with a net loss of $931.6 million and a loss per share of $18.29, compared with a net loss of $596.8 million and a loss per share of $11.72 in fiscal 2007.
Spectrum (Pink Sheets: SPC) makes Rayovac batteries, Tetra pet supplies, Remington shaving and grooming and personal care products, household insecticides and lawn and garden care products.