Finding Finance Strategies

1
Finding Finance Strategies and Tactics That
Work

• The creative avenues distressed companies are
  using to meet their financing needs in this market

David L. Treadwell Chief Operating
Officer EaglePicher Incorporated
2
EaglePicher Incorporated

• Seven (7) Operating Divisions With Total Revenues
  of 662mm
• Divisions Include
• Hillsdale Automotive 285mm
• Wolverine Automotive 105mm
• Filtration Minerals 90mm
• Government Power 130mm
• Distributed Batteries 12mm
• Medical Batteries 3mm
• Pharma 11mm
• Boron 26mm

3
EaglePicher Incorporated

• Filed for Chapter 11 Bankruptcy in April, 2005
• Primary Reasons
• Hillsdale division operating performance went
  from 40mm to 3mm over two year period
• Invested over 50mm in JVs with 0 return
• Tech group operating performance significantly
  off over three businesses.

4
Financing Strategy

• First Get credibility in the numbers
• Data is always bad
• Financial advisory firms
• Second Plan to stop the bleeding, fix
  operations and execute
• Quick action with firm, consistent direction
• Involvement of customers
• Third Develop a plan to return the business to
  health and execute

5
Financing Strategy

• Throughout Build credibility with employees,
  customers, vendors and financial participants
• Traditional lending sources not likely to be much
  help
• Good News Visibility of auto sector troubles
  have brought availability of high risk debt to
  our market
• Bad News Objectives are not always in line with
  creating long term value and high risk is
  high yield
• Find source that has incentives aligned with
  company

6
Whats Worked

• EaglePicher Incorporated
• Situation Financial numbers suspect, business
  process nonexistent, several divisions had
  significant operations problems, wide variances
  in capabilities.
• Solution Accurate numbers, operations
  stabilized, implementing operational plan to
  return business to health. Bondholders funded
  50mm third lien (PIK) debt and supported a
  first/second lien package of 295mm. Convertible
  to exit financing upon emergence. This replaced
  all existing financing.
• Result EPI is financially solid pending
  emergence. We can commit to a solid growth plan
  with our employees and customers.
• All supported by the foundation of operational
  excellence.

7
Whats Worked

• Oxford Automotive
• Situation Weeks from running out of cash,
  needed months to complete 100mm transaction.
• Solution Beneficiaries of potential transaction
  were the existing bondholders. They funded a
  100mm loan, convertible to DIP financing upon
  filing. This allowed the company to complete the
  transaction and file an orderly, pre-packaged
  bankruptcy
• Result No shipments missed. Oxford exited
  bankruptcy in four months, optimized value for
  impaired party.

8
Conclusion

• Plenty of funding available for a price
• Make sure you understand the entire price are
  they going to support the plan or just looking to
  the assets? Keep your priorities in order.
• Get a quick handle on the actual situation
• Delay will kill you be realistic, ask for help
• Financial numbers are always suspect
• Focus on fixing operations
• Build credibility
• Look to the sources with a vested interest in
  your success