Keystone Automotive Recaps with help of Platinum Equity, Littlejohn & Co.

Keystone Automotive Operations Inc., the Pennsylvania-based maker of specialty automotive equipment and accessories, has reached agreements with affiliates of Platinum Equity and Littlejohn & Co. to reduce its outstanding debt by $295 million. Kirkland & Ellis, Miller Buckfire & Co., and FTI Consulting provided advice to Keystone; Willkie Farr & Gallagher provided advice to the PE firms.

Keystone Automotive Operations, Inc. (“Keystone” or the “Company”) announced today that it has reached agreement with affiliates of Platinum Equity, LLC and Littlejohn & Co., LLC, holders of more than 64 percent of its Senior Subordinated Notes due 2013 (the “Majority Holders”) on the terms of a recapitalization transaction (the “Transaction”) that is expected to reduce the Company’s outstanding indebtedness and enhance the Company’s ability to compete in the aftermarket auto parts industry. Upon consummation, the Transaction would reduce Keystone’s and its parent company’s outstanding indebtedness by approximately $295 million.

“We are very pleased to have reached agreement with the Majority Holders on the terms of a recapitalization that will reduce debt, strengthen our balance sheet, and better position us for future growth opportunities and long-term success,” said Ed Orzetti, President and Chief Executive Officer of Keystone. “We look forward to continuing to offer our customers and suppliers the most comprehensive inventory selection in our industry, the highest levels of customer service and innovative marketing support.”

Under the terms of the Transaction, Keystone’s existing $175 million Senior Subordinated Notes would be converted into new equity. As part of the Transaction, the Majority Holders have agreed to backstop a $60 million rights offering (the “Rights Offering”) and Bank of America, N.A. has committed (subject to the satisfaction of certain conditions) to provide a new asset-based revolving credit facility (the “New ABL Loan”). Goldman Sachs Lending Partners LLC has been engaged to arrange a new $120 million first lien senior secured term loan (the “New Term Loan”). The proceeds of the Rights Offering, the New ABL Loan and the New Term Loan in addition to cash on hand, would be used to repay the Company’s existing ABL revolving credit facility and senior secured term loan facility. The Transaction provides that all trade suppliers will continue to be paid in full for all goods and services provided to the Company. Upon the closing of the Transaction, the Company is projected to have at least $55 million of total liquidity.

The Company expects to continue to operate in the ordinary course of business and does not anticipate any significant interruption to its business. As of January 1, 2011, Keystone had approximately $44 million in cash on hand to support its business operations. The Company expects the Transaction to be consummated in the first half of 2011.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities. There can be no assurance that the conditions to the commitment under the New ABL Loan will be satisfied or that the New Term Loan will be consummated.

Kirkland & Ellis LLP, Miller Buckfire & Co., LLP, and FTI Consulting, Inc. are serving as legal advisors, investment bankers and financial advisors, respectively, to Keystone.
Willkie Farr & Gallagher LLP is serving as legal counsel to the Majority Holders.