NN Inc is a Charlotte-based precision-components maker that spent years as a cyclical auto supplier and is now trying to prove that a managed exit from commodity vehicle work can fund a higher-margin franchise in data-center cooling, defense machining, and medical tools. The second-quarter print is the first clean look at that rotation after Harold Bevis's multi-year plant cleanup. Sales rose almost one fifth, and adjusted earnings before interest, taxes, depreciation, and amortization expanded faster than the top line. The more important change arrived after quarter-end, when the company retired most of the Series D preferred that Morgan Stanley Tactical Value had held since the earlier recap.
That preferred was the silent claim on residual equity. Accrued dividends and a stepped coupon had pushed the carrying value above $122 million by mid-year, while common book equity had shrunk to just over $21 million. Management used a $75 million private placement of common shares plus an exchange of preferred into stock. That combination retired roughly $89 million of the preferred claim. A $35 million stub remains at a ten percent in-kind rate. The recap is real deleveraging of the preferred stack for common holders. It is also a large common-share issuance that more than doubled the share count from the mid-year base. The remaining problem is the senior term loan, still priced near thirteen percent including paid-in-kind interest.
The quarter itself showed the mix working. Power Solutions, the electrical and precision-stamping franchise, grew much faster than Mobile Solutions, the auto-heavy machining book. GAAP still printed a loss because cash interest and preferred accretion outran operating income. The investment debate is whether data-center, defense, and medical awards convert into cash after the remaining preferred stub and the expensive term loan, or whether the market is already paying for a completed turnaround. Does the second half convert award volume into free cash, or does working-capital inflation and China capacity spend consume the print?