TransDigm Deepens Cuts, Takes Out More Debt
Major aerospace and defense supplier TransDigm Group is cutting its workforce by as much as 15% in the wake of the novel coronavirus pandemic and raising $1.1 billion in new debt financing, the company announced April 2.
The workforce cuts are the second wave to be unveiled this year by the key supplier of proprietary aerospace and defense parts. On Feb. 5, TransDigm said it planned to lay off 3-10% of its direct and indirect workforce in part due to the Boeing 737 MAX production halt and rate reductions in other aircraft manufacturing programs.
But TransDigm said the COVID-19 crisis is making business far worse. “The company is beginning to see significant decreases in demand across its commercial aerospace business and expects this trend will continue in the coming months,” according to a statement.
TransDigm further expects to implement 1-2 week furloughs at “many” locations over roughly the next six months in response to business unit-specific situations. Meanwhile, TransDigm CEO and President Kevin Stein will take a 50% reduction in cash compensation and other senior executives also will “substantially” reduce their cash compensation. TransDigm’s board of directors will forgo their annual cash board fees.
The company said its business forecasts may change more, as the duration and magnitude of the crisis are still uncertain. “TransDigm remains confident in its business model over the long term and hopes to return to normal employment levels as soon as practical,” the company said.
The new debt financing, a private offering of 8% senior secured notes due in 2025, will be used to boost liquidity, TransDigm said.
The company is just the latest of several aerospace and defense providers that have sought new debt financing as credit agency finalists have said there is a short-term liquidity crunch affecting all corners of the economy.