Werner lenders are working with financial advisor Rothschild and legal counsel Gibson Dunn as the company faces imminent debt maturities, said two sources familiar with the situation.
For their part, a group of unsecured bondholders tapped law firm Paul Weiss Rifkind Wharton & Garrison as legal advisor, as reported by Bloomberg.
The Triton Manager-owned ladder and related accessories maker is under pressure to address an upcoming maturity on its USD 355m Libor+ 400bps term loan due July 2024. JPMorgan acts as administrative agent on the loan, which was last quoted 95.75/97.75 on Markit. The company’s USD 265m 8.75% senior unsecured notes due 2025 last traded on 28 March at 81 to yield 19.38%, according to MarketAxess.
The Illinois-based issuer has a USD 150m (USD 93m outstanding) asset-based lending facility (ABL) due 2026 with a springing maturity feature. The ABL will accelerate to April 2024 if the maturity on the term loan is not addressed by then, according to a S&P Global Ratings release. The rating agency downgraded Werner’s credit ratings to CCC+ from B- in December 2022, citing elevated leverage, weak earnings and cash flow concerns due to slower demand for its products and weakening macroeconomic conditions.
“Werner's pending debt maturities, weakened financial performance, and tightened liquidity, combined with the unfavorable conditions in the capital markets, could render its capital structure unsustainable,” noted S&P analysts in the release.
The company operates in a cyclical sector and is at the whim of the residential construction markets, which can contract quickly in a recessionary environment. On the bright side, Werner benefits from customer concentration, with a bulk of its sales coming from products sold at investment-grade companies The Home Depot and Lowe’s Companies, noted Moody’s Investors Service analysts in a December 2022 report, where the ratings agency cut the issuer's corporate family rating to Caa2 from B3. Strengths include the company's leading market position for its products, especially Werner-branded ladders and its track record of developing innovative products that fulfill needs in the marketplace, according to the Moody’s release.
Werner had USD 35m of total liquidity available as of September 2022, including USD 11m cash and USD 24m availability under the USD 150m asset-based lending (ABL) revolver that was USD 93m drawn, according to Moody’s.
Triton acquired the company in 2017, ten years after it emerged from bankruptcy with a plan confirmed by the United States Bankruptcy Court for the District of Delaware. Under the plan, a group of prepetition debtholders including Black Diamond Capital Management, Brencourt Advisors, Levine Leichtman Capital Partners III, Milk Street Investors, Schultze Asset Management and TCW Shared Opportunity Funds got the equity keys to the company, according to a press release. The company filed for bankruptcy at that time, due to volatile aluminum prices and customer concentration, after Home Depot launched its own private label ladders eating into Werner’s market share.
Werner, Rothschild and Gibson Dunn did not return requests for comment.
