American auto parts manufacturer Garrett Motion Inc said on Sunday it filed for Chapter 11 bankruptcy protection, as she was grappling with heavy debts due to a payment settlement dispute with former parent company Honeywell International Inc and the COVID-19 pandemic.
Garrett said he entered into a “stalking horse” purchase agreement with private equity firm KPS Capital Partners LP for $ 2.1 billion.
The stalking horse agreement would imply that any other offer presented must be greater than the offer made by KPS. The agreement is subject to court approval.
Garrett said he is also seeking court approval for a $ 250 million debtor-in-operator financing facility. Throughout the reorganization process, Garrett expects to operate uninterrupted.
The company has listed both assets and liabilities between $ 1 billion and $ 10 billion, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.
Automakers have been hit hard by the coronavirus outbreak, as it has closed vehicle factories and resulted in lower production and disrupted supply chains.
“…the financial stress the heavy debt and liabilities we inherited in the Honeywell split – all exacerbated by COVID-19 – have created a significant long-term burden on our business, “CEO Olivier Rabiller said in a statement.
In January, the company accused Honeywell of designing the spin-off of Garett, its transportation systems business, in late 2018 to offload Honeywell’s responsibilities related to asbestos exposure claims.
Garrett hopes to get out of Chapter 11 and complete the sales process in early 2021.
Morgan Stanley & Co Llc and Perella Weinberg Partners served as financial advisers to Garrett.
Sullivan & Cromwell LLP and Quinn Emanuel Urquhart & Sullivan LLP were legal counsel. AlixPartners was Garrett’s restructuring advisor.