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March 16, 2010

US: Revised Visteon plan better for creditors

Visteon Corporation has filed an amended plan of reorganisation and disclosure statement with the US Bankruptcy Court.

Visteon Corporation has filed an amended plan of reorganisation and disclosure statement with the US Bankruptcy Court.

Under the amended plan, Visteon would retain its US defined benefit pension plans and provide recoveries to unsecured creditors, including bondholders and trade creditors, the partsmaker said in a statement.

The amended plan is supported by Visteon’s term loan holders and other lenders totalling about 74% of secured claim. Under the amended plan, the term lenders’ entire US$1.629bn secured claim will be converted to equity, which would leave the reorganised company virtually free of debt in the US, Visteon said.

Visteon also said it had been having discussions with a group of pre-bankruptcy petition bondholders regarding an alternative plan of reorganisation based on a backstopped rights offering for the equity of the reorganised company.

“To date, the company has not received a proposal that it considers acceptable. Nonetheless, the company has not terminated these discussions and has advised the ad hoc group it is receptive to reviewing any proposals,” Visteon said.

Under the amended plan, the term lenders will receive 85% of the common stock in reorganised Visteon. Holders of Visteon’s 12.25% senior notes will receive their pro rata share of approximately 6% of the common stock (representing a recovery of more than 50% of the face value of their claims).

Holders of Visteon’s other unsecured notes and non-trade claims will receive their pro rata share of approximately 9% of the common stock (a recovery of about 20% of the face value of their claims).

Trade creditors will receive cash in an amount equal to their pro rata share of $23.9m, an approximately 50% recovery.

“Although these distributions are a significant improvement over the proposed distributions in the originally filed plan of reorganisation, the amended plan still leaves the bondholders and other general unsecured creditors substantially impaired. As such, the amended plan does not provide for any recovery to holders of Visteon’s equity securities,” the supplier said.

The company intends to seek approval of its amended disclosure statement at a hearing scheduled for 13 April in the bankruptcy court in Delaware.

Reuters noted that the former Ford unit had been aggressively overhauling its operations as well as addressing balance sheet problems – its improved performance had caught the attention of investors who have bid up its bonds and even its shares, which rose from less than 2 cents each last December to more than a $1 per share this month.

Last week, hedge funds that own about 7% of Visteon’s shares asked to meet with the board to discuss a plan of reorganisation that would provide them with a recovery. Shareholders have the lowest priority claim on a bankrupt company, the report noted.

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