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April 27, 2017

Takata share trading stops after bankruptcy plan news

Trading in Takata Corporation shares was suspended on Thursday (27 April) after a report the airbag maker at the heart of the car industry's largest recall was considering a bankruptcy plan to create a new company and ring fence its liabilities.

Trading in Takata Corporation shares was suspended on Thursday (27 April) after a report the airbag maker at the heart of the car industry's largest recall was considering a bankruptcy plan to create a new company and ring fence its liabilities.

According to Reuters, Japan's Nikkei business newspaper reported Chinese owned supplier Key Safety Systems (KSS), the company's preferred bidder, would sponsor the turnaround plan by injecting JPY200bn (US$1.8bn) and helping create a new operating company.

That money would be transferred to Takata to help settle claims linked to faulty air bags that have been blamed for at least 16 deaths worldwide, Reuters added. Agreement on a restructuring deal, eight years after the first death, would enable Takata to draw a line under the crisis and help it continue supplying replacement air bag inflators, as well as selling seat belts and other vehicle components, the report noted.

In a statement, Takata said: "Certain media reports today… have indicated that Key Safety Systems (KSS), a potential sponsor of Takata, has reached a basic agreement with automakers to apply a restructuring framework in which Takata is split into two separate companies.

"While it is true that negotiations regarding Takata's restructuring framework are progressing, mainly between the automakers and KSS, the steering committee and Takata have not been made aware of such an agreement. Currently no decision of any kind has been made, and there is no new information to disclose."

Reuters had reported earlier this month a group including KSS, a US unit of China's Ningbo Joyson Electronic, and Bain Capital was Takata's preferred bidder, and would offer around JPY200bn.

Takata has long insisted it prefers a privately arranged restructuring, but people with knowledge of the situation have told Reuters the company has come under increasing pressure from potential bidders and automaker clients to agree to a court ordered process, which would provide more transparency.

Reuters said automakers including Honda Motor, which have been paying for recalls for almost a decade, have insisted on the court route – even if that would wipe out shareholder value, hitting the founding Takada family, with a 60% stake.

Takata's statement added: "Takata has established an external steering committee and commissioned it to develop a comprehensive restructuring plan to address the various issues related to airbag recalls. Takata has received a recommendation from the [committee] regarding KSS as a potential sponsor. Negotiations are continuing to progress between representatives of KSS, automakers and the [committee] regarding the formulation of a restructuring plan for Takata. Once a final proposal has been received, it will be presented to Takata's board of directors, who will make a final decision."

Reuters said today the committee and potential bidders have been negotiating for months with talks dragging. That was due to differences over issues including price and how to handle risks for suppliers, two sources have told the news agency.

Discussions that involve the automaker's clients, suitors and bankers are likely to run on until at least the end of May before a decision is reached, Reuters' sources have said.

In January, Takata agreed to plead guilty to criminal wrongdoing in the United States and to pay US$1bn to resolve a US federal investigation into its inflators.

A federal judge in Detroit this month said he plans to name former FBI director Robert Mueller to oversee nearly $1bn in Takata restitution funds, as part of a US Justice Department settlement, the Reuters report added.

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