Vehicle seat specialist Lear is to become the latest US components company to file for Chapter 11 bankruptcy as the “fastest and most effective way” to reduce debt in the face of slumping global auto production.
The company said the reorganisation was supported by key secured lenders and bondholders and it had obtained US$500m in bankruptcy financing.
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The planned Chapter 11 filing is the latest in a string of recent failures of component suppliers, highlighting the pressure they faced as vehicle production fell and key customers General Motors and Chrysler became bankrupt.
Lear said only it planned to file for bankruptcy shortly but did not specify timing. A syndicate of secured lenders led by JPMorgan and Citigroup agreed to provide $500m of debtor-in-possession financing for the bankruptcy that could be converted to exit financing once the supplier emerges from Chapter 11 protection.
Lear made sales worth $13.6bn last year and vehicle seats accounted for almost 80% of its sales. It is ranked the 11th largest global auto parts supplier by sales according to Automotive News. The company was founded in 1917 in Detroit, went public in 1994 and grew through a string of 18 major acquisitions since.
According to the US Motor & Equipment Manufacturers Association, at least 15 auto parts suppliers have filed for bankruptcy or had their assets seized by creditors this year including Visteon, Metaldyne and Noble International.
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By GlobalDataLear chairman, CEO and president, Bob Rossiter said in a statement: “This restructuring is being undertaken to maximise the long-term value of the company. We intend to complete the restructuring as quickly as possible, and emerge as an even stronger and more competitive partner to our customers.
“We want to assure everyone… Lear is committed to positioning our business for sustainable success. We believe that the agreement in principle with the steering committees of our secured lenders and bondholders to support our plan of reorganisation will enable us to emerge expeditiously.”
