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Grove Worldwide in Chapter 11 – Debt to fall from $584 million to $205 million

Grove Worldwide has voluntarily filed for reorganisation under Chapter 11 of the US Bankruptcy Code. The filing was part of an agreement reached with major creditors and is part of a major restructuring under which the company plans to reduce its total debt from US$584 million to $205 million. This will reduce annual interest payments from $63 million to $17 million.

Businesses affected by the filing include the Shady Grove factory in Pennsylvania and the National Crane subsidiary. All of the company’s operations outside the US are excluded.

The filing reflects the ongoing problems that Grove has had in servicing its debt since it was bought by Keystone. In effect a group of major banks are swapping secured debt for equity and will ultimately hold 75 per cent of the common stock while the current bondholders will have 20 per cent. The remaining 5 per cent will be at the discretion of the board and all of the above is subject to official approval of the re-organisation plan. Until that time Keystone retains ownership of the company.

Senior management at Grove remains unchanged and there are no immediate plans for further restructuring or redundancies. The company has just finished a major re-engineering of the Shady Grove plant which involved $13 million of investment and completely re-organised product flows for both the crane and access platform product lines.

Jeffry Bust, chairman and chief executive of Grove Worldwide, stressed that the restructuring process will have “no impact on the Company’s abilities to fulfil its obligation to its employees or to its customer throughout the world”. He added that: “Ours is a balance sheet problem, not an operational one. From an operational standpoint, the company has never been stronger. Since 1999 we have invested more than $41 million to improve design and manufacturing processes at Shady Grove”.

He continued: “Our operations in Europe are stronger than ever. Deutsche Grove has been operating at capacity for the last three years and our Delta Manlift operations in France have had significant growth. We are continuing to increase our share in the AT market and have just completed a very successful showing at the bauma international trade show, which resulted in $30 million in new orders”.

Anticipating suggestions that Grove might not recover from Chapter 11 Bust said: “We realise that our competitors overseas, as well as domestically, will try to capitalise on this news, but the simple truth is that we are not going away and the actions we are taking today will make us a much stronger company in the future. We will have a balance sheet and financial structure that will enhance our position as a leading worldwide provider of mobile hydraulic cranes, truck mounted cranes and aerial work platforms”.

Bust expects the process to be completed within a few months at which point Keystone will effectively move out of the lifting industry and write off a significant chunk of investment in Grove. The result should be a much more attractive balance sheet at Grove Worldwide.