Making the Mold & Breaking the Mold - The Rise and Fall and Rise of SOLA OPTICAL
4. Detail › Refinancing at the 11th Hour

Home Home Table of Contents Table of Contents

4.8 Refinancing at the 11th Hour – Early 2001

Karen Roberts

It was late December 2000 when SOLA found out the existing bank syndicate was not willing to provide new finance to the company once its current obligations ended in May 2001. This was due principally to SOLA’s poor financial performance, which resulted in its credit rating being downgraded by the two leading credit agencies, Moody’s and Standard and Poor. Following this downgrading, SOLA breached its banking covenants in the prior 2 quarters and were on the verge of breaching them in Q4. Jeremy Bishop and Steve Neil endeavored to form a new banking syndicate without any success so a high priority effort was started working with USB Warburg to look at raising high yield bonds and mezzanine debt.

Jeremy brought Ted Gioia back into the company in February 2001 to work with him and Steve Neil on re-financing and the 3 of them were supported by Jeff Cartwright, Brett Olsen and Karen Roberts with support from UBS Warburg consultant.

An Offering Memorandum for senior notes was prepared in February 2001 for a bank meeting. This meeting was quickly followed by two separate meetings with Moody’s and S&P to stabilize our credit rating.
Unfortunately after a substantial amount of effort, both companies still downgraded our credit rating. S&P downgraded SOLA from BB+ to BB with a continuing negative watch while Moody's downgraded SOLA from Ba2 to Ba3.

Jeremy, Steve, and a couple of guys from UBS Warburg then did a series of roadshows with the Offering Memorandum to secure debt. They did an excellent job under the cloud of the lowered ratings and the senior notes were eventually oversubscribed.

After the finance had been raised, the focus shifted to expediting a number of austerity and restructuring activities to ensure the cash generation and financial targets could be met. These included migrating manufacturing from Cader Lane (Petaluma), Wexford, Eldon etc. We also stopped the Goldfish, poly Matrix and FIST programs. A number of long term SOLA employees also left during this period or shortly thereafter.
This was all interesting as it was on the back of some very growth oriented meetings through the second half of 2000:

  • SOLA/AO New Product meeting in July 2000
  • Global progressive symposium in October 2000
  • Cheeca Lodge NA meeting to merge the SOLA and AO businesses (almost over Bernie and my dead body’s!)
  • A November 2000 SMM in La Jolla focussed on growth.