Protection One reports going-concern issues, may file for Chapter 11

By Jeff Pines

Washington, March 24 - Tight cash and a heavy debt burden continue to plague Protection One Inc., and the company's auditor is concerned about the company's "ability to continue as a going concern."

A standstill agreement between the company and the lender for its revolver leaves the company without any borrowing, it said in its March 24 10-K filing with the Securities and Exchange Commission.

And Protection One said it has also started discussions with Quadrangle Group LLC and its affiliates and certain bondholders about a restructuring and the talks may lead to a restructuring under Chapter 11, the company said.

Westar Energy Inc, the company's former parent, sold its majority stake in Protection One to the Quadrangle on Feb. 17, which constituted a change of control.

Because of the change in control the company is in default on the $215.5 million outstanding on its revolver.

Protection One said it also has recurring losses, working capital deficiencies, the inability to obtain ongoing financing and covenant breaches on its outstanding debt.

As previously reported, the Topeka, Kan.-based commercial and home security firm retained Houlihan Lokey Howard & Zukin Capital as its financial advisor.

The company is still within the 60-day grace period for the coupon payment due on its 7 3/8% senior notes due 2005. The payment on the $190.9 million outstanding of notes was scheduled for Feb. 17. If the company cannot make the payment before the grace period ends, the noteholders could accelerate the debt, which would cause cross defaults on its other debt.

In addition, the company is in breach of a covenant of its 13 5/8% senior subordinated discount notes because it did not offer to repurchase them within 30 days of a change in control in the company. This could cause a cross default under the indenture for the 8 1/8 senior subordinated notes.

Protection said it does not have the money to pay off all of the debts that would come due and it would have to file for protection under Chapter 11 if creditors demanded payment.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.