Visteon has been sent back to the negotiating table to improve its plan to fund an emergence from bankruptcy after shareholders told a judge that they had a less expensive proposal.
Delaware Bankruptcy Court Judge Christopher Sontchi postponed a hearing on a request to approve an agreement that would have underpinned the company’s proposed reorganisation, Reuters reported.
On Friday, shareholders approached the company with their own plan, which they said was similar to the company’s proposal – except it would cut fees and replace at least US$175m of debt with equity that would be bought by shareholders.
“This is an opportunity for a more consensual plan to emerge over the next two weeks, and that is something all parties will take advantage of,” Marc Kieselstein, of law firm Kirkland & Ellis, which represents Visteon, told the news agency.
Sontchi said he was reluctant to lock the company into commitments and fees while negotiations were continuing. “What is the hurry?” he asked.
He added that the burden was shifting to shareholders to reach an agreement.
The supplier’s proposed reorganisation would give holders of $870m of unsecured bonds the opportunity to buy $1.25bn in stock in the reorganised company. That money, along with $400m in new debt, would be used to pay off secured lenders in full.
The company was in court on Monday to ask the judge to approve the financing agreements and fees for that plan. Shareholders and secured lenders argued for more time and urged the judge not to approve the requests, which would lock the company into fees that some argued could approach $100m.
Approval “will lock in humongous administrative expenses and prevent people from even negotiating, and a superior plan could be lost,” said Martin Bienenstock of the law firm Dewey & LeBoeuf, which represents a group of shareholders.
Visteon, a major supplier to Ford, has used bankruptcy to overhaul its operations as well as its balance sheet, and its first-quarter profit soared to $233m from $2m a year earlier. That success has attracted plenty of suitors.
Secured lenders have proposed their own plan, in which they would replace some of the bondholders buying the stock to recapitalise the company.
Shareholders worked from the secured lenders’ plan to improve it, Bienenstock said, by replacing some of the exit debt financing with equity, which shareholders would buy at a 5% premium.
Other parties are also circling. An attorney representing funds associated with Aurelius Capital, which hold the company’s equity, said they were prepared to “put forward a substantive proposal.”
In addition, Johnson Controls said on Friday it had offered to pay $1.25bn for most of Visteon’s assets.
Johnson Controls made the cash offer for Visteon’s vehicle interior and auto electronics business in a letter sent 7 May after a round of initial contacts in January.
Johnson Controls said its proposal was better for debt and equity holders than the company’s current proposal.