Turnaround Tuesday: Alion Science Works to Refinance Notes

Struggling Alion Science and Technology Corp. is working to restructure debt.

Alion provides engineering, information technology, naval architecture and operational services to businesses in the defense, government and commercial sectors.

The McLean, Va.-based company filed a prospectus with the U.S. Securities and Exchange Commission on April 22 saying that it plans to exchange $235 million in 10.25 percent senior notes due 2015 for $235 million in third-lien senior secured notes due 2019.

The company is refinancing because almost all of its debt matures in the next 12 months, and it does not have the money to repay it. "We have determined that the refinancing transactions described in this prospectus represent the best alternative for us to pursue and are critical to our continued vitality," Alion says.

In December 2013, the company entered into a refinancing support agreement with ASOF II Investments LLC and Phoenix Investment Advisor LLC, which hold about 67 percent of the notes.

Alion has a history of losses, which have contributed to its inability to repay the notes. Alion's liabilities exceed assets, which the company says in a Feb. 14 SEC filing makes it harder and more expensive to refinance debt.  Alion says the losses cast doubt about the company’s ability to continue as a going concern, or without the threat of liquidation.

The company's revenue was $849 million for the 2013 fiscal year, an increase from the $817 million in revenue it had for fiscal year 2012. The company's net loss was about $18.5 million for the three months ended Dec. 31, compared to $11 million for the three months ended Dec. 31, 2012.

The company is heavily dependent on contracts with the federal government for revenue. "Interruptions in the government funding process, whether from federal budget delays, debt ceiling limitations, government shutdowns, sequestration or Department of Defense spending cuts could materially adversely affect the Company’s revenue and cash flows," the company says.

For last week's edition of Turnaround Tuesday, see "Crumbs Sweetens Plan with Loan from Dippin' Dots Owner."

For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List.