Chapter 11 for Lear as US supplier struggles
- Source: Shanghai Daily
- [08:11 July 08 2009]
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By Dan Strumpf
Struggling auto parts supplier Lear Corp filed for Chapter 11 bankruptcy protection yesterday after receiving the support it needed from lenders and bondholders.
The move had been expected from Lear, which missed an interest payment on its bond debt last week and revealed its intention to seek court protection from its creditors. The Michigan-based company listed $1.27 billion in assets and $4.54 billion in liabilities. Subsidiaries outside the United States and Canada are not part of the filings, the company said.
"We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," CEO Bob Rossiter said.
Lear is the first major auto parts maker to seek court protection since Visteon Corp, the former parts arm of Ford Motor Co, filed for Chapter 11 in May. Auto parts suppliers have been hammered by the economic downturn as consumers continue to shun new cars and auto makers slash production.
Chapter 11 filings by General Motors Corp and Chrysler Group LLC and the idling of most of their factories has dealt a particularly hard blow to the auto supply base.
Lear is heavily dependent on the struggling North American and European auto markets, with 36 percent of its sales coming from North America and 49 percent from Europe.
Lear, which posted $13.6 billion in sales for 2008, is a key supplier for both General Motors and Ford. The pair represent the company's two largest customers and account for a combined 40 percent of its sales.
Lear said it was hoping for an "expedited" bankruptcy process. The parts maker said it has support from more than 50 percent of its bondholders and about 69 percent of its secured lenders for its reorganization plan.
Shares of Lear, which trade on over-the-counter markets since the New York Stock Exchange delisted the stock, have plunged over the past year.
Shares closed on Monday at 29 cents and plunged 43 percent to 16 cents in yesterday premarket trading. During a bankruptcy proceeding, common shareholders are typically wiped out.
It announced it was preparing to file for bankruptcy protection last week after a grace period expired on a $38 million interest payment that would service its 8.5 percent senior notes due in 2013 and its 8.75 percent senior notes due in 2016.