After unsuccessfully trying to prop up the company with a series of equity infusions,
Under the restructuring agreement, the company’s second-lien note holders will assume control of the company. Kohlberg & Co., a middle-market firm founded by
Chris Lacovara, co-managing partner of New York-based Kohlberg & Co. and also Holley’s vice president and treasurer, did not return calls requesting a comment. But James Wiggins, an operating principal at Kohlberg & Co. and Holley’s CEO, said in a statement, “The restructuring represents the culmination of tremendous effort on the part of the team at Holley, and we are excited to share news of this successful program with you.”
Holley embarked on a buying spree under Kohlberg & Co., making six acquisitions between August 1998 and November 1999. The deals ranged in size from $5.6 million for Weiland Automotive Industries Inc. in August 1998, to as large as $22 million for Hooker Industries Inc. in July 1999.
Kohlberg & Co. changed the management team between 2002 and 2003, bringing in Tomlinson and Wiggins, among others. “Kohlberg has been very engaged, very helpful, a top-notch organization,” Tomlinson said. “It’s unfortunate this happened many years ago and those decisions [to expand] could not be reversed.”
Tomlinson, who joined the company in 2003, said Kohlberg & Co. gave management at the time the latitude to make the deals. But he blamed the economy of the last few years—with high oil prices and cautious consumers—and not Kohlberg & Co. for Holley’s financial distress. “It was absolutely necessary for the company to grow its revenues to grow into the capital structure, and prevailing economic conditions made it difficult,” he said.
Kohlberg & Co. last year stopped giving the company the money it needed to make its interest payments, which led to the company defaulting on its second-lien notes.
Holley management and the note-holders have created a prepackaged plan in which the note holders will swap their securities for $50 million in new second-lien notes and more than 90 percent of Holley’s equity. Wells Fargo Foothill Inc. is leading a $60 million debtor-in-possession financing. The plan is scheduled for confirmation on March 19.
Note holders, which are owed as much as $145.8 million, will take over the company. Holley, a NASCAR sponsor, listed debts of $243 million and assets of $106 million as of Jan. 18. The reorganization will cut Holley’s debt by about $100 million, and the new stockholders will hold $50 million of the remaining debt. About 500 company employees in the United States and abroad make carburetors for NASCAR, NHRA Drag Racing and other racing circuits, as well as fuel and air systems for the industrial marketplace.—B.V.