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UK business as usual as Exide files for Chapter 11

Exide Technologies, the world's leading producer of vehicle batteries, has applied for bankruptcy protection. The US-based firm has filed for Chapter 11 cover under the US bankruptcy code. It said the move was the best way to restructure its business and obtain new working capital while continuing to trade.

Its operations outside the US including its UK businesses will continue to trade as normal. The news means Exide joins a growing list of US companies that have filed for Chapter 11, including energy giant Enron.Exide ran up massive debts because of its aggressive global expansion strategy. It also blames difficult trading conditions for forcing the company to restructure.

“Over the past several months, we have made a number of difficult yet necessary operational changes,” says chief executive Craig Muhlhauser. “We are now taking the next step to resolve our financial challenges and focus on addressing our balance sheet issues.”

Exide has arranged $415m (£289m) in new financing. This includes $250m (£172m) in debtor-in-possession financing provided by Citicorp, a subsidiary of Citibank. The new cash, which has been approved by the US courts, means Exide will be able to continue trading, pay employees' wages and pay suppliers.

The bankruptcy filing allows the US units time and space to negotiate with creditors. Chapter 11 enables a company to set aside environmental liabilities, which can be substantial for lead-based manufacturers like battery makers. The bankruptcy filing listed assets of $2.07bn (£1.42bn) and debts of $2.52bn (£1.73bn) as of December 2001.

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