Western Digital’s Debt-Restructuring Talks Hit a Snag
Western Digital Corp. said Thursday that key talks with bank lenders about restructuring $226 million in company debt have hit an unexpected snag.
The Irvine computer components manufacturer said that if it cannot agree with its lenders, the banks could demand immediate repayment of $226 million in debt. Western Digital would then face a shortage of working capital, and its ability to do business would be jeopardized, the company said.
Western Digital, which lost $134.2 million for its fiscal year ended June 30, traced the delay to the complexity of the documents involved and unresolved issues among the 13 banks.
In addition, one international bank that holds 2% of the total debt has not decided whether to participate in the restructuring. The company said it is seeking full participation from the 13 lenders.
Western Digital stock closed unchanged Thursday at $3.25 a share on the New York Stock Exchange.
Despite the unresolved lender issues, a company statement said the firm’s officers believe that “a mutually acceptable debt restructuring can be achieved within the next several weeks.”
The restructuring calls for consolidating about $166 million in outstanding bank loans into a single credit agreement through June 30, 1993.
The restructuring would also cover the company’s existing $40-million line of credit drawn on its accounts receivable. The banks must work out disagreements over those accounts receivable, the company said.
During the the past nine months, the company’s losses have left it in violation of its loan agreements. The banks have granted temporary waivers to Western Digital rather than declare the loans to be in default.
The latest waiver expired in September, but lenders have continued to cooperate with the company by rolling over outstanding borrowings as they mature, the company said.
The company also announced Thursday that it has closed the sale of its network products division to Standard Microsystems Corp. in Hauppage, N.Y., for $33 million. The deal was originally announced in March.
