American Axle & Manufacturing Holdings has amended a credit agreement but its shares fell over 30% as investors worried about a continued risk of bankruptcy.
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The supplier, once a driveline and forge unit of General Motors’ Saginaw division before being sold off in 1994, said the new credit agreement provided a waiver of the financial covenants under its revolving credit facility until 30 July and that it remained in talks with lenders to further modify the credit facility.
According to Reuters, JPMorgan analyst Himanshu Patel said he continued to see a greater than 50% likelihood of a bankruptcy filing by the company after the waiver expired.
“American Axle suggests the waiver is a positive step toward a more permanent solution, but we worry that if American Axle were going to achieve meaningful medium-term covenant relief, its lenders would likely have not merely granted a wavier,” Patel said in a research note.
American Axle spokesman Chris Son said the company remains focused on a comprehensive restructuring but would not comment on speculation.
During the waiver period, the company was required to maintain a daily minimum liquidity of US$100m, it said.
As of 30 June, American Axle had about $280m of liquidity, consisting of available cash, short-term investments and committed borrowing capacity on its credit facility.
Lear filed for Chapter 11 bankruptcy protection on Tuesday, the largest in a string of recent failures of auto parts suppliers.
There has been speculation this week that the speed at which GM and Chrysler were put through bankruptcy, and the willingness of private sector lenders to provide Lear with debtor in possession financing, may prompt other auto suppliers to follow suit into a restructuring.
