Creditors are giving Breed Technologies Inc. a 31/2-month reprieve on its debts as the airbag maker seeks solutions to its financial problems.
One possible remedy: selling part of the business.
Last week the Lakeland, Fla., supplier was given until Oct. 12 to make payments on $675 million in debt that were due June 30. Breed has racked up total debt of about $900 million during an aggressive acquisition strategy in recent years.
Among the conditions of the reprieve: Breed must pay a higher interest rate on the debt after August and 'explore strategic alternatives for the business.'
Analysts say the latter stipulation translates to selling part of the company.
Breed announced that it has retained an investment banking firm, Wasserstein Perella & Co. of New York, to advise it on a 'capital transaction program.' But a Breed spokeswoman last week would not confirm that a sale is necessarily likely. 'We are exploring many ideas and haven't fully clarified what our options are,' said spokeswoman Gina McLean.
Analysts have reported that Breed talked to Siemens AG about a possible acquisition. In 1997, Siemens formed a joint venture with Breed to design 'smart' airbags. As part of the deal, the German supplier bought a 10 percent share of Breed.
The two companies broke off acquisition talks last month, according to Standard & Poor's Corp.
Breed's failure to comply with the new creditor arrangement could result in a default, the company said last week.
Breed has many worldwide operations that it could sell. 'But if they had their choice, I'm sure they wouldn't want to sell any of it,' said David Strickler, an analyst with Bowles Hollowell Conner & Co., a Charlotte, N.C., investment firm that follows Breed.
Just two years ago, Breed paid $711 million to buy the seat-belt business of AlliedSignal Inc. Strickler said reselling that operation easily could wipe away Breed's problems.
But such a sell-off might undermine Breed's strategy of supplying total safety-restraint systems, the analyst acknowledged.
Breed has tried to piece together a global systems approach to its airbag business. It has acquired steering-wheel producers, seat-belt makers, sensor manufacturers and other suppliers in North America and Europe to turn itself into an integrated supplier.
But as operating losses mounted, Breed began taking steps to get rid of excess overhead. In the past two years it has closed half of its worldwide plants. It also has tried to get out of the plastic trim business.
Breed spokeswoman McLean said the company is in no danger of missing supply schedules with its customers, of which General Motors is the largest.
She said Breed has been in 'continuous communications' with its customers as it works through its debt problems.