Lexington Precision Corporation

The Company

Lexington Rubber Group, Inc., a subsidiary of Lexington Precision Corporation, is a leading supplier of precision molded rubber products serving the medical and transportation markets.

Lexington’s major product lines include insulators for automotive ignition systems; connector seals for automotive wire harnesses and molded rubber components for medical devices. Lexington has consciously avoided commodity products, where price competition is fierce, and build its business around producing tight tolerance, precision molded rubber products that require high levels of quality and process repeatability, such as seals for laparoscopic surgical devices, injection sites for intravenous feeding systems that are assembled using high-speed automated assembly machinery, and plunger tips for syringes used in applications where dosages must be controlled with great precision.

 

The Situation

In the face of extremely challenging market conditions, Lexington took aggressive action to consolidate and strengthen its operations and maintain its margins. But the near collapse of the North American automotive industry ultimately drove the company into Chapter 11. A team of bankers, led by Andre Augier, now Quarton Partners’ chairman and chief executive officer, was charged with recapitalizing and restructuring the company.

 

The Quarton Difference

Unlike many bankruptcies, where a weak product portfolio, poor quality or bad customer relationships have to be addressed along with the financial restructuring, Lexington was very well positioned in each area. They even had the advantage of a diversified and growing revenue stream in the medical device component market. Their biggest issue was a debt load that couldn’t be serviced with automotive volumes at their lowest levels since World War II. Complicating the recapitalization was the difficulty of negotiating claims in a highly uncertain economy, where the survival of some of the country’s leading industrial companies was in question. The banking team’s tenacity, and the compelling investment case they built around Lexington’s product and business strategy, helped drive a very successful plan of reorganization.

 

The Result

The banking team’s negotiations with multiple tiers of debt holders and other creditors, coupled with a cash injection by a Los Angeles-based private equity firm ultimately led to court-approved plan of reorganization and new ownership.