Akebono Brake Industry Completes Refinancing

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Akebono Brake Industry Co., Ltd. has announced significant milestones in its financial restructuring. The company has secured a refinancing loan from Deutsche Bank AG and plans to fully repay outstanding loans by the end of June 2024. This marks the completion of their Business Turnaround Plan initiated in 2019.

Key Highlights:

• Refinancing Loan Agreement: Akebono secured a 32.0 billion yen loan from Deutsche Bank AG, Tokyo Branch, with a drawdown date of June 28, 2024. The loan will be used to repay the remaining 49.0 billion yen of outstanding loans.
• Completion of Business Turnaround Plan: The period of the Business Turnaround Plan will officially end on June 28, 2024, as the company meets its repayment obligations.
• Elimination of Going Concern Assumption Notes: With the new loan agreement in place, Akebono has resolved issues regarding its liquidity, eliminating doubts about its ongoing viability.
• Financial Impact: The company expects to record non-operating expenses of approximately 1.0 billion yen in FY2024, Q1, related to the financing.

Background

In 2019, Akebono initiated a Business Turnaround Plan under the Business Turnaround ADR Proceedings, aiming to enhance profitability. Despite challenges such as the COVID-19 pandemic, semiconductor shortages, and rising raw material costs, the company achieved an operating profit of 3.2 billion yen in FY2023. This recovery was attributed to increased sales prices and productivity improvements.

In October 2023, Akebono decided to close one of its U.S. subsidiary plants by December 2025. Moving forward, the company aims to improve its profit structure and achieve sustainable growth through enhancing high-profit businesses and product development.

Outline of the Loan Agreement

1. Loan Form: Syndicated loan (Term loan)
2. Loan Amount: 32.0 billion yen
3. Agreement Date: June 14, 2024
4. Loan Term: June 28, 2024 – End of June 2029
5. Arranger and Agent: Deutsche Bank AG, Tokyo Branch
6. Financial Covenants: Includes gross leverage ratio, debt service coverage ratio, total cash balance, consolidated net assets, consolidated operating profit, and capital expenditure.
7. Collateral: Land, buildings, shares of subsidiaries and affiliates, and short-term loans receivable from subsidiaries and affiliates.

Elimination of Going Concern Assumption

Previously, Akebono disclosed significant doubts about its ability to continue as a going concern due to high levels of debt. With the execution of the new Loan Agreement, these doubts have been resolved, and the company will not include “Important Notes Regarding Going Concern Assumption” in its upcoming Annual Securities Report.

Financial Statement Impact

Akebono expects to incur approximately 1.0 billion yen in non-operating expenses due to financing in FY2024, Q1. If revisions to the consolidated earnings forecast disclosed on May 15, 2024, are required, the company will promptly announce them.

Akebono appreciates the ongoing support and cooperation from its stakeholders as it continues on its path to financial stability and growth.