Source: https://www.leadfreefrisco.com/2013/07/breaking-news-judge-gives-exide-final-approval-for-500m-dip-loan/
Timestamp: 2019-09-21 17:40:34
Document Index: 328481437

Matched Legal Cases: ['§\n105', '§ 363', '§\n361', '§\n105', '§ 363', '§ 106', '§ 363', '§ 361']

BREAKING NEWS: Judge gives bankrupt Exide final approval for $500M DIP loan despite objections from City of Frisco, TCEQ, 10 states, EPA, Department of Justice due to concerns that city, state and U.S. taxpayers will be left to pay for cleanup of toxic contamination at Exide facilities; Frisco cleanup costs now range between $15 million and $130 million; How will Exide deal with its environmental liabilities in this second bankruptcy? - Lead Free Frisco
Children's Health, Clean-up of Exide lead smelter site, Clean-up of Frisco Exide lead smelter site, Exide Bankruptcy, Exide's Negative Impact on Other Communities, Impact on Property Values, Lastest News	Previous Next
Exide received final Bankruptcy Court approval today of its $500 million debtor-in-possession (DIP) financing provided by JPM Chase and a group of lenders to whom the DIP financing was syndicated.
This final approval came in spite of objections filed by entities ranging from the City of Frisco, the TCEQ, environmental agencies from California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Kansas, Mississippi and Missouri and the Department of Justice/EPA. All expressed objections to how the DIP loan terms essentially were crafted to prevent Exide from having to pay full cost of cleanup of existing contamination at its facilities, or to pay for environmental cleanup from an accident or emergency at one of Exide’s lead smelters or facilities.
This is Exide’s second bankruptcy in 11 years. The company last filed bankruptcy in 2002. It officially came out of bankruptcy in 2004. Exide didn’t settle its environmental liabilities with the EPA, NOAA, etc., until May, 2011. Click here and scroll down to “NATIONAL” headline to read how Exide shed environmental cleanup liabilities in its last bankruptcy.
On July 19, the City of Frisco joined with the TCEQ in objecting to final approval of the $500 million loan. Below are excerpts from the City’s filings with the U.S. Bankruptcy Court. (Links to download copies of full filings are below each) What Frisco officials know at this point about the extent of contamination from the Exide lead smelter, as well as the City’s concerns about how the terms of Exide’s debtor-in-possession loan were crafted to keep it from paying for the true cost of the cleanup of toxins such as lead and cadmium in nearby soil and water (including Stewart Creek, which is a tributary to Lake Lewisville, a major water supply for the area) are documented in these filings.
§ Case No. 13-11482 -KJC
EXIDE TECHNOLOGIES §
§ Final Hearing: July 24,2013 at 10:00 a.m.
§ Relates to Dkt. 17 and 79
DECLARATION OF WADE M. WHEATLEY, P.E. IN SUPPORT OF THE
JOINDER BY THE CITY OF FRISCO, TEXAS IN THE
TEXAS COMMISSION ON ENVIRONMENTAL QUALITY’S OBJECTION
TO DEBTOR’S MOTION FOR INTERIM AND FINAL ORDERS (I) AUTHORIZING
DEBTOR (A) TO OBTAIN POST-PETITION FINANCING PURSUANT TO 11 U.S.C. §§
105,361, 362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), AND 364(e) AND (B) TO UTILIZE
CASH COLLATERAL PURSUANT TO 11 U.S.C. § 363, (II) GRANTING ADEQUATE
PROTECTION TO PRE-PETITION SECURED PARTIES PURSUANT TO 11 U.S.C. §§
361, 362, 363 AND 364 AND (III) SCHEDULING FINAL HEARING PURSUANT TO BANKRUPTCY RULS 4001 (b) and (c)
CONTAMINATION OF SITE AND SURROUNDING AREA
7. The waste streams produced at the Exide facility have resulted in widespread contamination of the site and surrounding area, and multiple state and federal environmental enforcement actions have been taken at the facility. Since 2010, the Texas Commission on Environmental Quality(TCEQ) has issued three Agreed Orders to the facility (Docket #2011-1712-IHW-E for improper waste management; Docket #2011-0521-MIS for excessive discharges oflead particulate to the atmosphere; and Docket #20 10-1818-IWD-E forunmonitored wastewater discharges to Stewatt Creek). It is also under a United States Environmental Protection Agency (EPA) Administrative Order on Consent (RCRA 06-2012-0966) for improper waste management practices.
8. As discussed above, the Exide facility is constructed, in part, over the historic stream channel for Stewart Creek and the northern tributary. Boring logs (soil lithology records) indicate that slag, battery chips, and soil have been used as fill material under the facility. The deepest repmt of battery chips and slag is at a depth of28.5 feet below grade in MW-30. Based on soil sample results provided in the 7/10/2013 Mfected Property Assessment Report1 (AP AR), almost the entire surface of the Exide facility is contaminated with lead. Exceptions to that include the eastern edge of the facility and the Battery Receiving/Storage Building area, which is the westernmost building in the main portion of the facility. Although the near-surface soils aren’t contaminated under the Battery Receiving/Storage Building and surrounding area, significant contamination is present from 4 to 10 feet below grade in that area.
9. In the 7/10/2013 APAR, Pastor, Behling & Wheeler, LLC (PBW) concluded that groundwater at the site is not impacted. However, as discussed below, that conclusion is based in part on the characterization of the uppermost groundwater bearing unit as a “Class 3” groundwater resource.2 It is my opinion that a “Class 3” designation is unsubstantiated and technically incorrect based on currently available information which clearly indicates that the groundwater is a “Class 2” resource.
10. There are several landfills located on the Exide property(7/10/2013 APAR) which represent areas of environmental concern and pose potential threats to public health and safety. I have evaluated potential remedies to address areas of environmental concern associated with the operation of the Exide facility, including the on-site landfills, which include the potential excavation of waste and contaminated environmental media present above environmental action levels that will be protective of human health and the environment. 11. As discussed below, the majority of the materials from these landfills would likely meet the definition of hazardous waste under the RCRA if the materials were to be exhumed and actively managed. As such, these exhumed materials would have to be managed in accordance with applicable RCRA regulations.
CLICK HERE TO DOWNLOAD COMPLETE COPY OF FILING
§ Chapter II
§ Final Hearing: July 24, 2013 at I 0:00a.m.
DECLARATION OF HENRY J. HILL IN SUPPORT OF TI-IE
DEBTOR (A) TO OBTAIN POST -PETITION FINANCING PURSUANT TO 11 U.S.C. §§
105,361,362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(J), AND 364(e) AND (B) TO UTILIZE
CASH COLLATERAL PURSUANT TOll U.S.C. § 363, (II) GRANTING ADEQUATE
361, 362, 363 AND 364 AND (III) SCHEDULING FINAL HEARING PURSUANT TO
BANKRUPTCY RULES 4001(b) AND (c)
5. This Declaration is filed in support of the Joinder by the City of Frisco in the
Objection of the Texas Commission on Environmental Quality’s Objection to the Debtor’s Motion
for Interim and Final Orders (I) Authorizing the Debtor (a) to Obtain Post-Petition Financing
Pursuant to 11 U.S.C. §§ 106,361,362, 364(c)(l ), 364(c)(2), 364(d)(l) and364(e), and (b) to Utilize
Cash Collateral Pursuant to § 363, (II) Granting Adequate Protection to Pre-Petition Secured
Creditors Pursuant to 11 U.S.C. §§ 361, 362, 363, and 364, and (III) Scheduling Final Hearing
Pursuant to Bankruptcy Rules 400 1 (b) and (c).
6. In my capacity as the Deputy City Manager I provide general administrative support
for the City Manager. I am also responsible for the Public Works, Parks and Recreation,
Communications, Library, Convention and Visitors Bureau, and Human Relations Departments. In
that capacity, I have dealt with, and have had partial oversight responsibility for, City personnel and
City consultants who are monitoring the demolition of the existing Exide plant and facilities,
monitoring the testing of the real property owned by Exide for contamination, and monitoring the
clean-up of the Exide property as well as land outside the boundaries of the Exide propetty which
lay within the Frisco City Limits.
8. On June 6, 2012, Exide and Frisco entered into a Master Settlement Agreement (the
“Agreement”) to (a) close the Ex ide Frisco Site subject to satisfaction of the requirements of the
Texas Commission on Environmental Quality (TCEQ) under the Texas Risk Reduction Program
(TRRP) and (b) remediatc, under the Voluntmy Cleanup Program (VCP), and then sell
approximately 170 acres of the land surrounding the Exide Frisco Site to Frisco and its development
corporations (the “J Parcel”) after issuance of the Final Certificate of Completion by the TCEQ on
that acreage. Under the Agreement, Exide would (a) perfonn any necessary cleanup of the property
to be sold, and (b) provide release ofthe liens held by secured lenders on the J Parcel as conditions
precedent to the closing. Exide would retain ownership oftheremainingproperty at the Exide Frisco
Site. Frisco agreed to pay a premium for the J Parcel, considering the potential contamination, to
cause Exide to cease operations, to facilitate environmental cleanup of the Exidc plant and the Exide
Frisco Site, and to put into place necessary protection of downstream prope1iies. A true and correct
certified copy of the Agreement is attached hereto and incorporated herein as Exhibit “A.”
9. On May 2, 2012, Exide entered into a Consent Order with the United States
Environmental Protection Agency, RCRA Docket No. 06-2012-0966, (the “Consent Decree”) which
required Exidc to (a) finalize the implementation of a revised sampling and analysis plan for the
Ex ide Frisco Site and (b) to finalize and submit a Site Investigation Report. The Consent Decree
was incorporated by reference into the Agreed Order in Docket No. 2011-1712-IHW-E between
Exide and the TCEQ dated January 30, 2013, (the “Agreed Order”). A true and correct certified
copy of the Agreed Order is attached hereto and incorporated herein as Exhibit “B.” The Consent
Decree and the Agreed Order defined, in part, the actions to be taken by Exide on the Ex ide Frisco
1 0. The cleanup and closure of Exide Frisco Site that began in December 2012 was also
addressed in part by Exide Permit HW -50206 issued on March 31, 2001. A first step in the closure
process is decontamination and demolition of the various buildings, infrastructure, and associated
equipment. In December 2012, Ex ide posted plans athttp://www.exidefriscoclosure.com describing
its plans for decontamination and demolition of the site, including dust control and air monitoring.
The TCEQ issued a letter dated February26, 2013, stating that there was no Agency objection to the
decontamination and demolition plans. The Exide Frisco Site decontamination and demolition was
commenced prior to the bankruptcy filing.
I I. On October 25, 2012, Exide and Frisco entered into a Volw1tary Cleanup Program
Agreement (the “VCP Agreement”) with the TCEQ regarding the J Parcel. A true and correct
certified copy of the VCP Agreement is attached hereto and incorporated herein as Exhibit “C.” In
the VCP Agreement, Ex ide has agreed to use cleanup levels for lead that are at least as stringent as
standard residential cleanup requirements to include a cleanup level of250 parts per million. The
VCP Agreement requires Exide to submit an Affected Property Assessment Report (APAR) to
TCEQ not later than September 13, 2013.
12. On April 29, 2013, Exide, though W & M Environmental Group, Inc., issued its
“Interim Action Work Plan for Slag and Battery Case Fragment Removal and Disposal” (the
“Interim Work Plan”). On July I, 2013, the TCEQ issued its approval letter of the “Interim Work
Plan.” This Interim Work Plan limits the cleanup activities to removal of Battery Chips which can
be recovered using hand tools and is not a comprehensive remediation plan. A true and correct copy
of the Interim Work Plan is attached hereto as Exhibit “D.” The Interim Work Plan will not
accomplish the necessary remediation to satisfy the requirements of the Agreement.
13. The investigation of the contamination of the Exide Frisco Site has now expanded
to areas beyond the borders of the Exide property based on investigations conducted by both the
TCEQ and Frisco in Stewart Creek, a tributary that runs through the Exide Frisco Site westward and
ultimately enters Lewisville Lake which is a major water reservoir for North Texas. Battery Chips
and slag from the Exide plant have been found in and on either side of Stewart Creek and
investigations are now underway to determine both the extent of the contamination, its severity, the
potential method of remediation, and the costs of remediation. No data is yet available to make
reasonable estimates of costs on any of these issues. However, if the studies reveal additional
contamination which presents a threat to public health and safety, action may be required from Frisco
to address these issues if they are not immediately addressed by the Debtor.
14. Frisco has taken action on more than three previous occasions of its own volition to
protect the public from the contamination created by the Exide plant. Three of the most recent are:
First, on December I 0, 2007, Frisco enrolled a 3.3 acre parcel lying south of Stewart Creek and
adjacent to the Exide property known as the Stewart Creek Wastewater Treatment Plant Site in the
Voluntary Cleanup Program (the “Stewart Creek Wastewater VCP Application”). A true and conect
ce1tified copy of the Stewart Creek Wastewater VCP Application is attached hereto and incorporated
herein as Exhibit “E.” The Stewart Creek Wastewater Treatment Plant Site was found to contain
Battery Chips and slag from the Exide plant, and Frisco initiated a cleanup ofboth the Batte1y Chips
and the slag on this parcel. Second, on September 28, 2011, Frisco submitted a Sclfimplcmcntation
Notice (SIN) on a 12 acre parcel north of Stewart Creek and in close proximity to the Exide property
for voluntary cleanup. Third, on July 8, 2013, Frisco enrolled an additional 340 acres of land known
as “Grand Park,” which is land lying West of and not adjacent to the Exide property, in the TCEQ’s
Voluntmy Cleanup Program to investigate the contamination issues in the portions of Stewart Creek
which traverse Grand Park (the “Grand Park VCP Application”). A true and cotTect certified copy
ofthe Grand Park VCP Application is attached hereto and incorporated herein as Exhibit “F.” On
July 17, 2013, the TCEQ accepted the Grand Park VCP Application for assistance and review of site
investigation and cleanup activities. The land lying between the Ex ide propctty and Grand Park as
well as the land lying West of Grand Park, including those remaining portions of Stewart Creek
leading to Lewisville Lake, are not cunently subject to any Voluntary Cleanup Program applications
and/or agreements with the TCEQ. The extent and degree of contamination in those areas remain
unknown but present a potential threat to public health and safety as well as an additional Exide
cleanup responsibility.
15. Paragraph 6.13 of the Supe:rpriority Debtor-in-Possession Credit Agreement (the
“Credit Agreement”) does not appear to allow the Debtor to usc any portion of the proceeds from
the proposed financing to pay for the costs that are currently known to be necessary and will be
incuned to remediate the Exide Frisco Site, Grand Park or Stewart Creek as well as those costs
which may be detcnnined to be necessary by on-go.ing environmental studies. The Events ofDefault
under the Credit Agreement include Covenant Defaults which appear in Paragraph 8.2. A Covenant
Default includes a failure to produce earnings before income taxes, depreciation and amortization
(“EBITDA”) which complies with the requirements of Sections 7.4 and 7.5. Schedule 1.1 of the
Credit Agreement defines the term “EBITDA” in part as follows:
“EBITDA” means, at any date of determination, with respect to the
Company and its Restricted Subsidiaries, for the applicable period,
the sum (without duplication) of(a) Net Income; plus (b) to the extent
Net Income has been reduced thereby, … (v) any unusual or
non-recurring gain (or loss), together with any related provision for
taxes on any such unusual or non-recurring gain (or the tax effect of
any such unusual or non-recurring loss), realized by the Company or
any Restricted SubsidiaJy during such pc1iod, including, without
limitation (A) any charges, costs, fees and expenses directly incurred
as a result of restructuring activities (including, without limitation,
severance cost and facility closures) and discontinued operations
(other than such charges, costs, fees and expenses to the extent
constituting losses arising from such discontinued operations), (B)
non-recurring cost and expenses incurred in connection with cost
reduction or environmental compliance initiatives of the
Company and its Restricted Subsidiaries in an aggregate amount
not to exceed $5 million during the term of the Agreement ….
To the extent net income is allowed to be used to fund an “environmental compliance initiative,”
including those required by the VCP Agreement, the Consent Decree the Agreed Order, and the
Agreement, that usage is effectively limited to $5,000,000.00 in the aggregate during the tcm1 of the
Credit Agreement. The term “Maturity,” which would equal the term of the agreement, is defined
in Schedule 1.1 as:
… the earliest to occur of (a) the first Business Day that occurs 16
months after the Closing Date, (b) the acceleration of the Advances
and the termination of the Commitments pursuant to Section9.1, (c)
45 days after the entry of the Jnteiim Financing Order if the Final
Financing Order has not been entered by the Bankruptcy Court prior
to the expiration of such 45-day period and (d) the substantial
consummation (as defined in Section 1101(2) of the Bankruptcy
Code, which for purposes hereof shall be no later than the effective
date thereat) of a Reorganization Plan that is confirmed pursuant to
an order entered by the Bankruptcy Court.
Therefore, the funds necessary to fund “environmental compliance initiative(s)” could be garnered
only out ofless than one and one-half years of earnings assuming those expenditures did not reduce
the EDITDA below the required contractual levels. Based on the Debtor’s earnings history reported
on its Fom1 10-K for the period ending March 31,2012, filed with the Securities and Exchange
Commission (the “SEC”) on June 7, 2012, and theFonn 10-K for the period ending March 31,2013,
filed with the SEC on June 14, 2013, the Debtor has, and continues to experience, losses or
diminished earnings which would not allow the Debtor to comply with the terms of the Credit
Agreement and would eliminate the possibility of using the Debtor’s net income for remediation
16. TI1e Debtor’s Fom1 1 0-K for the period ending March 31, 2013, makes the following
statement concerning its environmental liabilities:
The Company has established liabilities for on-site and off-site
environmental remediation costs where such costs are probable and
reasonably estimable and believes that such liabilities are adequate.
As of March 31, 2013 and March 31, 2012 , the amount of such
liabilities on the Company’s Consolidated Balance Sheets was
approximately$25.4 million and$27.7 million, respectively. Because
environmentallia bilities are not accrued until a liability is determined
to be probable and reasonably estimable, not all potential future
environmental liabilities have been included in the Company’s
environmental liabilities. Therefore, changes in estimates or future
findings could have a material adverse effect on the Company’s
financial condition, cash flows, or results of operations.
Since the costs associated with the remediation of the Exide Frisco Site have not yet been completely
ascertained, but arc estimated by Frisco’s environmental consultants to be a minimum of $15.0
million and potentially exceed $100.0 million, it is probable that those costs arc not included in the
foregoing environmental liability estimates. Without regard to whether the Exide Frisco Site
remediation costs are or are not included, this significant liability cannot, under the terms of the
Case 13-11482-KJC Doc 375 Filed 07/19/13 Page 8 of 9
Credit Agreement, be funded. Therefore, the taxpayers of Frisco and the State of Texas may be
required to finance the Debtor’s environmental remediation obligations. Moreover, the proposed
Credit Agreement does not allow the collateral which is proposed to secure the advances made under
the Credit Agreement to be surcharged to recoup those tax dollars. This is the primary basis of
Frisco’s objection.
17. The Credit Agreement does not, from Frisco’s perspective, serve the best interest of
Frisco as a party in interest in this case. It does not permit the Debtor to address, financially or
otherwise, the public health and safety concerns created by the contamination at the Exide Frisco Site
as well as those lands lying downstream from that site in Grand Park or in Stewart Creek. If the
Debtor is handcuffed in its ability to undertake remediation of the Ex ide Frisco Site, Grand Park,
and/or Stewart Creek, Frisco and other govemmental entities may be compelled to immediately
respond to these public health and safety concerns as Frisco has previously done. Delay is not an
option since that could potentially further jeopardize public health and safety. Therefore, Frisco
must have the light to pursue a Section 506( c) surcharge to recoup the taxpayer funds which will be
expended under such circumstances for the benefit of the Debtor, the proposed debtor-in-possession
lenders, and the other parties to this case.
Dated: July 19,2013 ,~vtk
The City of Frisco’s Exide website
TCEQ Exide website
City considering removal of Exide landfills
The Exide Technologies plant in Frisco will allegedly require a more stringent cleanup effort than originally announced, according to consultants. Photo by Kelsey Kruzich.
Published: Wednesday, July 24, 2013 3:01 PM CDT
Recently filed documents in the Exide Technologies bankruptcy show a new possibility regarding the cleanup of the company’s Frisco property: the removal of landfills.
According to the filing, the city of Frisco estimates the remediation of land surrounding Exide’s former battery recycling plant in the city could cost as little as $15 million or as much as $130 million. The more expensive cleanup plan would include moving landfills that reside on the property outside of the city, an option neither Exide nor the city previously announced was being considered.
The high-end estimate echoes the sentiments of a former Exide manager who spoke to The Frisco Enterprise on the condition of anonymity in November.
“I have no plans on visiting the area as the landfills are there,” said the source at the time. “To get rid of them, it’d cost a lot of money; it’d cost at least $100 million to clean it up right, not $45 million. I’ve had enough history at the plant that I know I wouldn’t go back as long as they’re there.”
City officials confirmed the removal of the landfills is “an option being considered.”
“Due to the levels of lead contamination identified in the soils at the Exide site, the city of Frisco is concerned about future contamination of Stewart Creek, which flows into Lake Lewisville,” said Mack Borchardt, who is overseeing the cleanup as a special assistant to the city manager.
Borchardt added that consultants hired by the city said groundwater beneath the Exide property meets environmental agency definitions that require “a significantly more stringent soil cleanup standard.”
Assistant City Manager Henry Hill stated Exide’s current bankruptcy financing plan “fails to provide adequate funding for the cleanup.” As such, he said, the city filed its declaration to ensure the company meets its settlement with the city. Exide is obligated to “pay for the cleanup of the site and any off-site contamination that emanates from the site, in accordance with state and federal guidelines,” he said.
That settlement, announced in June 2012, will give the company $45 million in exchange for a 180-acre buffer zone surrounding Exide’s plant in the city. Local advocacy groups argued the cleanup wouldn’t rid the city of contamination, however, as Exide officials at public meetings have said they plan to leave the landfills after remediating them to environmentally compliant levels.
At a public meeting in February, Frank Clark, a senior consultant on the Exide cleanup, said hazardous materials found in the landfills would be cleaned but remain on plant property.
“We feel very confident that this re-treatment will have very consistent [and compliant] results,” he said. “Only when we’ve made that determination [that the material is compliant] will it go back in the landfill.”
According to Exide’s remediation schedule, cleanup of the land purchased by the city should complete in late May 2014. Remediation of the land retained by Exide is planned to continue through early 2016.
An Exide spokeswoman did not return a message left by The Frisco Enterprise’s seeking comment on whether the company will consider removing the landfills.
Published: 19 July 2013 10:22 PM
Updated: 20 July 2013 12:51 AM
Tags: agreement with Exide, cadmium, contamination, Department of Justice, dust, EPA, Exide, Exide debtor-in-possession loan, Exide DIP loan, Exide loan, Exide loan approval, Frisco, ground, hazardous waste, health, lead, lead accumulation, lead deposition, News1, Settlement Agreement, soil, Stewart Creek, water
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