TRW Automotive Announces Intent to Refinance Acquisition Related Seller Note

Transcription

1 News Release TRW Automotive Tech Center Drive Livonia, Mich USA Investor Relations Contact: Patrick R. Stobb (734) Media Contact: Manley Ford (734) TRW Automotive Announces Intent to Refinance Acquisition Related Seller Note LIVONIA, MICHIGAN, October 13, 2004 TRW Automotive Holdings Corp. (NYSE: TRW) today announced its intention to refinance its acquisition-related $600 million subordinated 8% pay-in-kind note ( Seller Note ). The Seller Note was issued by a subsidiary of the Company to an affiliate of Northrop Grumman Corporation ( Northrop ) in connection with The Blackstone Group L.P. s acquisition of Northrop s automotive business in February of The Company plans to repurchase the Seller Note with a combination of a newly issued term loan under the Company s existing senior credit agreement, available cash and existing liquidity arrangements. Completion of this refinancing action is an important next step for TRW Automotive to improve its overall cost of capital, said Joseph S. Cantie, executive vice president and chief financial officer. This plan has a positive net present value based on the reduced level of interest costs we expect to secure and the reduced face value of debt. Previous capital transactions and cash generated from operations, together with the pending Seller Note transaction, have allowed us to strengthen our capital structure, which has been a focus of ours since the acquisition. In connection with the refinancing activity, the Company reached agreement with Northrop to repurchase the Seller Note and to settle various contractual issues stemming from the acquisition for the net amount of $493.5 million, subject to financing. 1

2 The Company intends to raise approximately $300 million of proceeds through the issuance of a new bank term loan with the balance necessary to complete the transaction sourced from available cash and existing liquidity arrangements. The transaction is expected to close within the next 30 days. At the time of the acquisition, the Company valued the $600 million face-value Seller Note based on a 15 year life and 8% pay-in-kind interest, and determined that the fair value of the Seller Note, and corresponding book value at March 1, 2003, was $348 million using a 12% discount rate. As of September 24, 2004, the Company s third quarter close date, the book value of the Seller Note, including accrued interest, was $417 million. Additionally, the Seller Note had a face-value, including accrued interest, of $678 million as of September 24, Assuming the transaction is consummated within the expected timeframe, the Company expects to record a fourth quarter pre-tax charge of approximately $115 million for loss on retirement of debt resulting primarily from the difference between the repurchase price ascribed to the Seller Note and the book value of the Seller Note on the Company s balance sheet. This loss is U.S. based and therefore carries zero tax benefit due to the Company s tax loss position in this jurisdiction. Consummation of the refinancing will be subject to various conditions, including but not limited to the Company s ability to raise capital under a new bank term loan and execution of all related transaction requirements. Investor Conference Call and Web Cast The Company will host an investor conference call at 8:30 a.m. (EDT) today, Wednesday, October 13, to discuss details of the planned Seller Note transaction. To access the conference call, U.S. locations should dial (877) , and locations outside the U.S. should dial (706) A replay of the conference call will be available approximately two hours after the conclusion of the call and accessible for approximately one week. To access the replay, U.S locations should dial (800) , and locations outside the U.S. should dial (706) The replay code is Additionally, a live audio web cast and subsequent replay of the conference call will also be available on the Company s website at 2

3 About TRW With 2003 sales of $11.3 billion, TRW Automotive ranks among the world's top 10 automotive suppliers. Headquartered in Livonia, Michigan, USA, the Company, through its subsidiaries, employs approximately 61,000 people in 22 countries. TRW Automotive products include integrated vehicle control and driver assist systems, braking systems, steering systems, suspension systems, occupant safety systems (seat belts and airbags), electronics, engine components, fastening systems and aftermarket replacement parts and services. All references to "TRW Automotive", TRW or the "Company" in this press release refer to TRW Automotive Holdings Corp. and its subsidiaries, unless otherwise indicated. TRW Automotive news is available on the internet at Forward-Looking Statements This release contains statements that are not statements of historical fact, but instead are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this release. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in the TRW Automotive Holdings Corp. final prospectus dated as of February 2, 2004 (the "Prospectus") filed with the Securities and Exchange Commission (the "SEC") pursuant to Rule 424(b)(4), our Report on Form 10-K for the fiscal year ended December 31, 2003 (the 10K ), and our Reports on Form 10-Q for the quarters ended March 26 and June 25, 2004, and include: our ability to complete the refinancing transaction discussed above and reduce our level of interest cost; our substantial leverage; the highly competitive automotive parts industry and its cyclicality; pricing pressures from our customers; increasing costs for purchased components and raw materials; nonperformance by, or insolvency of, our suppliers; product liability and warranty and recall claims; our dependence on our largest customers; limitations on flexibility in operating our business contained in our debt agreements; increases in interest rates; fluctuations in foreign exchange rates; the possibility that our owners' interests will conflict with ours and other risks and uncertainties set forth under "Risk Factors" in the Prospectus, in the 10-K and in our other SEC filings. We do not intend or assume any obligation to update any of these forward-looking statements. # # # 3

4 Seller Note Refinancing Transaction Investor Presentation Joseph S. Cantie Executive Vice President and Chief Financial Officer Peter R. Rapin Vice President, Treasury & Tax October 13, 2004

5 Safe Harbor Statement This material contains statements that are not statements of historical fact, but instead are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those contained in forward-looking statements made in this release. Such risks, uncertainties and other important factors which could cause our actual results to differ materially from those contained in our forward-looking statements are set forth in the TRW Automotive Holdings Corp. final prospectus dated as of February 2, 2004 (the "Prospectus") filed with the Securities and Exchange Commission (the "SEC") pursuant to Rule 424(b)(4), our Report on Form 10-K for the fiscal year ended December 31, 2003 (the 10-K ), and our Reports on Form 10-Q for the quarters ended March 26 and June 25, 2004, and include: our ability to complete the refinancing transaction discussed herein; our substantial leverage; the highly competitive automotive parts industry and its cyclicality; pricing pressures from our customers; increasing costs for purchased components and raw materials; non-performance by, or insolvency of, our suppliers; product liability and warranty and recall claims; our dependence on our largest customers; limitations on flexibility in operating our business contained in our debt agreements; increases in interest rates; fluctuations in foreign exchange rates; the possibility that our owners' interests will conflict with ours; work stoppages or other labor issues and other risks and uncertainties set forth under "Risk Factors" in the Prospectus, in the 10-K and in our other SEC filings. We do not intend or assume any obligation to update any of these forward-looking statements. 2

6 Overview Putting Things Into Perspective Solid first-half 2004 financial results Achieved first-half financial and operational objectives Increased safety content driving sales growth Operating cost performance helping to offset the impact of customer pricing and inflationary pressures Favorable currency translation a positive Competitive strengths support financial performance, including: Focused product portfolio devoted primarily to safety related products Consumer demand and regulatory environment enhance content growth Effectiveness of cost reduction programs including Operational Excellence, Six Sigma and restructuring initiatives Leading market positions in primary products Diversification by customer, region, and product Debt reduction efforts have reduced net debt by $728 million post February 2003 Blackstone acquisition (1) Over $1 billion of liquidity attributable to available cash, revolver and A/R securitization facilities as of June 25, 2004 (1) Net debt is equal to total indebtedness (including receivables facility) minus cash, cash equivalents and marketable securities. For net debt reconciliation to closest GAAP equivalent, please refer to the reconciliation on slide 11 of this presentation. 3

7 Event Timeline Dec 2002 Northrop Grumman acquires TRW Inc. Feb 2003 Blackstone acquires TRW Automotive Jul 2003 Refinance debt #1 (term debt pay down of $46 million) TRW Achieves 2003 and First- Half 2004 Financial & Operational Objectives Nov 2003 Registers public debt Jan 2004 Refinance debt #2 (term debt pay down of $213 million) Feb IPO March 2004 Bond redemption ($286 million) April 2004 Term Debt pay down ($51 million) October 2004 Seller Note Refinancing 4

8 Seller Note Refinancing Transaction Seller note background Acquisition related $600 million, 8% pay-in-kind note payable to a subsidiary of Northrop Grumman Corporation Valued on a 15-year life using a 12% discount rate providing for a $348 million book value as of March 1, 2003 As of September 24, 2004, the accreted book value totaled $417 million Accreted face-value at September 24, 2004 at $678 million Transaction summary Repurchase the Seller Note and settle various contractual issues stemming from the acquisition, for a net amount of $493.5 million, subject to financing Although purchase price ascribed to the Seller Note represents a premium to the book value, it is at a substantial discount to accreted face-value Total transaction lowers gross debt with marginal increase to net debt 5

9 Seller Note Refinancing Transaction Refinancing plan $300 million sourced from a new Term Loan E facility $200 million from cash on hand (a portion of which may be temporarily drawn from the Company s working capital facility) Financial impact Accretive to forward earnings with expected lower interest expense Expect a fourth quarter pre-tax charge of approximately $115 million for loss on retirement of debt Loss results primarily from the difference between the Seller Note s repurchase value and book value on the balance sheet Transaction is U.S. based and therefore carries zero tax benefit due to the Company s U.S. tax loss position IMPROVES CAPITAL STRUCTURE BY REDUCING COST OF DEBT CAPITAL IMPROVES CAPITAL STRUCTURE BY REDUCING COST OF DEBT CAPITAL 6

10 Q2 Capital Structure Pro Forma for Refinancing (dollars in millions) Actual 6/25/04 Refinance Pro Forma Impact Pro Forma 6/25/04 Cash $ 519 $ (200) $ 319 Marketable Securities Subtotal $ 534 $ 334 Revolving Credit Facility - - Term Loan A-1 $ 350 $ 350 Term Loan D Term Loan D New Term Loan E Senior Unsecured Notes 1,017 1,017 Other Senior Debt Senior Subordinated Notes Other Debt 87 (40) (2) 47 Operating Company Debt $ 2,838 $ 3,098 Net Operating Company Debt $ 2,304 $ 2,764 Seller Note 405 (405) - Net Holding Company Debt $ 2,709 $ 2,764 (1) (1) A portion of this amount may be temporarily drawn against the Company s existing working capital facilities. (2) The settlement of various contractual issues will also result in the removal of $40 million of debt from the Company s balance sheet. 7

11 Deleveraging Continues (dollars in millions) $3,437 $3,295 Net Debt Summary (1) $2,964 PIK Seller Note Net Debt Operating Co. $2,849 $2,709 $3,089 $2,923 $2,582 $2,456 $2,304 Feb 28 Sep 26 Dec 31 Mar 26 Jun (1) Net debt is equal to total indebtedness (including receivables facility) minus cash, cash equivalents and marketable securities. For net debt reconciliation to closest GAAP equivalent, please refer to the reconciliation on slide 11 of this presentation. 8

12 Defining Success in 2004 IPO completed on February 6, 2004 New business wins at planned rates Achieve financial commitments, including Sales and earnings Implement cost savings at targeted levels Complete restructuring actions Reduction in effective tax rate Strengthen balance sheet by lowering debt OPERATING OBJECTIVES ENHANCE LONG-TERM SHAREHOLDER VALUE OPERATING OBJECTIVES ENHANCE LONG-TERM SHAREHOLDER VALUE 9

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14 Net Debt Reconciliation (dollars in millions) Period-End Balances 3/1/03 9/26/03 12/31/03 3/26/04 6/25/04 Cash $ 449 $ 399 $ 828 $ 449 $ 519 Marketable securities Total Short term debt Long term debt: Term loan facilities 1,510 1,469 1,480 1,263 1,211 Senior notes 1,142 1,155 1,178 1,049 1,017 Senior subordinated notes Lucas Varity senior notes Other borrowings Total Short & Long Term Debt 3,564 3,338 3,426 2,921 2,838 Net debt operating company $ 3,089 $ 2,923 $ 2,582 $ 2,456 $ 2,304 Seller note Net debt TRW Holdings $ 3,437 $ 3,295 $ 2,964 $ 2,849 $ 2,709 11