Anyone who thought that the financial crisis that has rocked the automotive industry was over was given a stark reminder earlier this week when Lear Corp became the third major auto parts supplier in the US to file Chapter 11 bankruptcy in the last month.
Back in March, Lear said its auditors had raised concerns about its ability to remain a “going concern” and suggested it might have to seek protection from creditors even though it had won an agreement giving it extra time to restructure its balance sheet.
However, less than a week ago, the company announced it had reached an agreement in principle with steering companies representing its secured lenders.
The debt restructure was expected to leave Lear with $1.1billion in debt and $500million of convertible shares. The DIP agreement will see the financing convert into exit financing with a three-year term on Lear’s emergence from bankruptcy.
According to chief executive Bob Rossiter, the company intends to proceed on an expedited basis and expects to submit the plan to Bankruptcy Court within 60 days. It aims to emerge from the process quickly.
