Automobile components supplier Garrett Motion stated earlier this week that it has filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the Southern District of New York, as it struggles with debt amid the Covid-19 pandemic as well as a dispute former parent company Honeywell over asbestos liabilities.
Known for its turbochargers, Garrett has entered into a ‘stalking horse’ purchase agreement with private equity firm KPS Capital Partners for US$2.1 billion (RM8.74 billion). This agreement implies that any other bids to come in must be higher than the offer made by KPS, and is subject to court approval, Automotive News reported.
Garrett Motion is seeking court approval for $250 million (RM1.04 billion) debtor-in-possession financing facility, according to Automotive News, and the auto parts manufacturer expects to continue operations without interruption throughout the reorganisation process. Its largest customer is Ford, which accounted for 12% of sales in 2019, according to Garrett’s annual report.
The company’s struggles have been compounded by inheriting what it claims to be former parent company Honeywell’s liabilities related to asbestos exposure claims, the report said.”The financial strains of the heavy debt load and liabilities we inherited in the spin-off from Honeywell – all exacerbated by Covid-19 – have created significant long-term burden on our business,” Garrett CEO Olivier Rabiller said in a statement.
On the other side, Honeywell said Garrett was pursuing a bankruptcy “to avoid the legitimate and reasonable financial commitments” the company assumed as part of its spin-off in 2018. “Garrett always has been capable of fulfilling those obligations with the assets it received in the spinoff,” Honeywell said in a statement according to Automotive News.
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