Nov. 5 (Bloomberg) -- Lear Corp.’s plan to reorganize by converting $3.6 billion of debt to equity won approval from a judge who said the auto-parts maker’s proposal faced no substantial objections.

U.S. Bankruptcy Judge Allan Gropper confirmed the Chapter 11 reorganization today in Manhattan, citing creditor support. Supplements to the plan, filed Nov. 2, disclosed new terms of a $550 million loan and named six replacements for a nine-member board led by Chairman Robert Rossiter. Lear expects to exit bankruptcy on Nov. 9, according to a company statement.

“I hope the next one will be as easy as this one turned out to be,” Gropper said. While the plan was “not sweet for stockholders” in the old company, whose shares were canceled, it included adequate information about how Lear would reorganize, the judge said.

Lear, based in Southfield, Michigan, expects to have about $1.2 billion to $1.3 billion in liquid assets and has secured almost $1 billion in exit financing. Lear agreed with JPMorgan Chase & Co. on a $550 million loan, replacing a previous $600 million loan, as well as a separate $400 million loan arranged by JPMorgan.

Gropper said he received a letter last night from a shareholder seeking to object to the plan. The judge said provisions wiping out the old stock and paying management bonuses were disclosed from the start of the case.

No Delay

“I understand the concern of the small shareholders,” Gropper said. “But we are certainly not going to delay confirmation. It’s extremely important that the company will move forward.”

Lear filed for bankruptcy in July with an agreement to restructure its debt from most lenders already in hand and won support from unsecured creditors for an altered version of the plan. Gropper allowed Lear to send its plan to creditors for a vote in September.

Under the plan, secured lenders will swap debt for equity in the reorganized company, getting about 26 percent of the new common stock, $500 million in preferred stock and a new $600 million term loan. The preferred shares can be converted into an additional 26 percent of common stock.

Those measures will give secured creditors an average recovery of around 83 percent, while unsecured creditors will get around 42 percent, lawyers for Lear said in court today.

General unsecured creditors, including holders of $1.3 billion in Lear notes and $737 million in unsecured loans, would get about 46 percent of the reorganized company’s common stock and warrants to purchase 15 percent more.

Board Members

In addition to Rossiter, who is also Lear’s president and chief executive officer, the board will include Thomas Capo, chairman of Dollar Thrifty Automotive Group Inc.; Curtis J. Clawson, chairman of Hayes Lemmerz International Inc.; Jonathan F. Foster, managing director of Current Capital; and Conrad L. Mallett Jr., CEO of Sinai Grace Hospital, court papers show.

Other board members will be Philip F. Murtaugh, former chief executive of Chrysler Asia Pacific Operations; Donald Runkle, CEO of EcoMotors International; Gregory Smith, principal at Greg C. Smith LLC; and Henry D.G. Wallace, a former executive at Ford Motor Co., according to court papers.

Wallace and Mallett serve on the current board.

The case is Lear Corp., 09-14326, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York Bankruptcy Court at tkary@bloomberg.net.

Last Updated: November 5, 2009 11:32 EST