Lear Comes Out Of Bankruptcy

(RTTNews) - Monday, auto-parts supplier Lear Corp. (LEA, LEARQ.PK | Quote | Chart | News | PowerRating) said that it has come out of chapter 11 bankruptcy by successfully reorganizing its business, with a strong and flexible balance sheet, positive operating results in the third quarter, a growing sales backlog and a notable competitive profile.

Chapter 11 bankruptcy is a form of court-supervised corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans. Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.

Upon the completion of the court-supervised financial reorganization, Lear has cut its debt obligations by about $2.8 billion, and the company currently has over $1 billion in cash. Lear has available liquidity to support its global operating needs and growth plans. Upon exit, Lear has less than $1 billion of debt at competitive interest rates and no near-term maturities.

According to petitions filed in the U.S. Bankruptcy Court for the Southern District of New York, the company had a debt of $4.5 billion and assets of $1.3 billion, as of May 30, 2009.

Currently, the Southfield, Michigan-based Lear has $1.4 billion of net sales backlog for 2010 to 2012, which is about 25% higher than the prior status, despite lower industry production levels. The new backlog represents continued diversification of Lear's sales, with 40% in its Seating business and 60% in its growing Electrical and Electronic business. Moreover, more than half of Lear's new business comes from outside North America.

Lear's Chairman, Chief Executive Officer and President, Bob Rossiter commented, "We have moved through the financial restructuring process without missing a beat operationally. We have continued to win new business globally, strengthened our industry-leading global capabilities and the spirit of the Lear team has never been more positive."

"As a result of our multi-year business transformation, we have streamlined our global cost footprint and improved our operating efficiency in every region of the world. Going forward, we have a focused overall plan to drive further sales growth and improved margins," Rossiter added.

The company also said that its new common stock will be listed on the New York Stock Exchange under its historical NYSE stock symbol "LEA" and will begin trading on a when issued basis today. However, the company said it expects its common shares to begin regular trading within several days thereafter.

On July 7, Lear and certain of its U.S. and Canadian subsidiaries filed for voluntary bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York , after reaching an agreement in principle regarding a consensual debt restructuring with steering committees representing its secured lenders and its bondholders. At that time, the plan had the support of a majority of the members of a steering committee of the company's secured lenders and a steering committee of bondholders acting on behalf of an ad hoc group of bondholders.

Since then, the company has secured support from additional secured lenders and bondholders and has entered into agreements supporting the restructuring plan with about 68% in principal amount of its secured lenders and more than 50% in principal amount of its bondholders.

The planned bankruptcy filing by Lear brings into focus the pressure on the sector due to bankruptcies at automakers General Motors Corp. (GMGMQ.PK) and Chrysler LLC. The filing adds evidence that even the automotive sector's largest suppliers are feeling the squeeze from plant shutdowns, slumping demand and tight credit markets.

The list of major auto-parts suppliers to seek Chapter 11 protection during this year include Visteon Corp. (VSTN.PK), Noble International Ltd. (NOBLQ.PK), and Metaldyne Corp., a unit of Japan's Asahi Tec. Another supplier, TRW Automotive Holdings Corp. (TRW | Quote | Chart | News | PowerRating) is trying to reach new deals with its creditors.

Further, Lear also filed several other customary "first day motions" with the Bankruptcy Court, including with respect to its cash management procedures, which will help it to continue conducting business without interruption while it pursues its restructuring on an expedited basis.

The company has filed motions seeking to continue to pay trade creditors under normal terms in the ordinary course of business. It had also been noted that any disruption in product flow from Lear, the world's second-largest maker of automotive seats, could lead to down of auto maker assembly plants around the world.

Lear also received commitments from a syndicate of secured lenders, led by J.P. Morgan (JPM | Quote | Chart | News | PowerRating) and Citigroup (C) for $500 million in new money debtor-in-possession or DIP financing.

Lear's legal advisors are Kirkland & Ellis LLP and Winston & Strawn LLP; its restructuring advisor is Alvarez & Marsal; and its financial advisor is Miller Buckfire & Co.

President Barack Obama's auto task force initiated a $5 billion financing support program to auto parts suppliers in April to avoid shutdowns as GM and Chrysler operated with $17.4 billion in government funding and faced the possibility of filing for bankruptcy protection at that time.

Automotive parts suppliers sought an additional $8 billion to $10 billion in loan guarantees as they grapple with the sharp decline in auto sales and a deepening crisis due to the bankruptcies of automakers. The suppliers reportedly prepared a presentation arguing that as many as 500 companies could face a severe cash crunch, including the possibility of liquidation.

Lear turned to profit in the third quarter, reflecting lower expenses despite a sharp decline in sales impacted primarily by lower production volumes in North America and Europe. Net income attributable to Lear for the quarter was $24.6 million or $0.32 per share, compared to a net loss of $98.2 million or $1.27 per share in the year-ago quarter. Quarterly net sales dropped to $2.55 billion from $3.13 billion last year.

In Monday's regular trading, shares of Lear are trading at $0.0164, down $0.0037 or 18.41%.

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