Gehl Could Be Forced Into Bankruptcy

Gehl Co. facing pressure from its bankers, must either forge new loan terms or face possible bankruptcy, its new French owner has said. After the West Bend, WI construction equipment maker violated conditions of its loan agreement, Gehl’s bankers demanded March 31 that it make early repayment of about $118 million of financing, the Manitou Group said in a statement last month announcing its 2008 results.

Manitou acquired Gehl in a friendly takeover last year for about $310 million. The acquisition has hurt the French material-handling equipment maker’s finances. Gehl contributed about $26 million in the last two months of 2008 to Manitou’s revenue of $1.68 billion for the year. That only partially offset the more than $31 million negative impact of changes in the currency exchange rate, Manitou said.

Gehl and Manitou had been negotiating with Gehl’s bankers to change the terms of its credit agreement. Some manufacturers have been able to get lenders to amend their loan agreements. But lenders also have a right to demand early repayment when a company is in violation.

In Gehl’s case, bankruptcy “is by no means certain or automatic as no surety is attached to this financing,” Manitou said in the statement. Surety is a sort of third-party insurance that guarantees loan payments. The Gehl acquisition and poor economic conditions have forced Manitou out of compliance with some of its loan agreements as well, the company said. Manitou also said its sales could slide as much as 40% this year.