Jul07
Lear files for bankruptcy
DETROIT -- Seating and electronics supplier Lear Corp. on Tuesday put its U.S. and Canadian operations into Chapter 11 bankruptcy protection. Lear made its filing in the U.S. bankruptcy court for the Southern District of New York, listing total assets of about $1.27 billion and total liabilities of about $4.54 billion. The company, like other North American suppliers, has been hard hit by extensive production shutdowns at Chrysler and General Motors, along with the worst U.S. light-vehicles sales environment in more than 27 years. Lear said its subsidiaries outside the U.S. and Canada are not part of the Chapter 11 filings. Lear, No. 11 in 2008 global auto parts sales, is the largest supplier to go under this year. Its bankruptcy has loomed since it missed a $38 million bond payment June 1. Bob Rossiter, Lear CEO, 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." Rossiter said Lear expects to submit the plan to the bankruptcy court within 60 days. "Our goal is to emerge from this process quickly and with an appropriate capital structure to support our long-term business objectives as a leading global competitor with the financial flexibility to build on our strengths and take advantage of future growth opportunities," he said in a statement.
GM biggest customer The bankruptcy move comes after Lear, which had been in talks with lenders, said on Monday it planned to convert $3.6 billion in debt into a combination of new debt, convertible stock and equity warrants under a planned reorganization in bankruptcy. The group had warned in March it might have to file for bankruptcy as some of its automaker customers struggle with bankruptcy themselves. Lear had breached its leverage covenants at the end of 2008 after borrowing all of the $1.2 billion in its main credit facility. Other Chapter 11 filers this year include General Motors, Chrysler LLC and at least nine other partsmakers, such as Visteon Corp. and Metaldyne Corp. GM is Lear's largest customer, representing about 23 percent of global 2008 sales of $13.6 billion. Ford Motor Co. accounted for another 14 percent of sales. Those two automakers were Lear's first major customers when it was founded in 1917, according to its Web site. Chrysler restarted seven North American assembly plants this week after having shut them April 30 when it filed for bankruptcy protection. GM has had a series of revolving factory closings over the past month.
3 years of losses Lear posted a net loss of $689.9 million in 2008, its third year in the red in four years, according to Bloomberg data. Those are the company's only annual losses since its shares debuted on the New York Stock Exchange in 1994. Lear made 17 acquisitions in the 1990s and in 2004 bought German electrical manufacturing company Grote & Hartmann. Late last year, citing fears that a Detroit 3 automaker would seek bankruptcy, Lear borrowed its entire $1.2 billion revolving line of credit. That, plus deteriorating cash flow, put the company in violation of its bank leverage covenant. Lear has been working in recent years to win more business in Asia and diversify from its reliance on Detroit 3 light-truck and SUV business.
Icahn bid rejected Nearly two years ago, Lear shareholders rejected a $37.25 per share buyout offer from billionaire investor Carl Icahn. The bankruptcy will likely wipe out the current 12 million shares as other debts are paid. Icahn, who then held a 16 percent stake in the company, offered to buy all of the company's remaining shares in a deal valued at about $5.3 billion, including the assumption of debt. Lear's board of directors initially approved the buyout. At the time, Rossiter pushed for the deal, saying the original offer of $36 per share was in the best interest of Lear shareholders. He personally stood to earn $12.3 million through the sale of his common shares at the time. But investor Richard Pzena opposed it. He called on other institutional investors to reject the offer on the grounds that the price was half of what Lear was worth. His Pzena Investment Management holds 5.4 million Lear shares, according to the Lear proxy
Source: [ Automotive News ]
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