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Visteon Suppliers Urged to Vote Down Bankruptcy Exit, Seek More Money
Visteon Corp.’s suppliers are being asked to vote down the car-parts maker’s plan to exit bankruptcy in order to win more money.
In a letter to Visteon’s suppliers and other unsecured creditors, Fulcrum Credit Partners LLC said if the bankruptcy exit plan fails, the company may be forced to negotiate a higher repayment.
Suppliers are being offered 50 percent of what they are owed. Fulcrum, which bought the right to collect some supplier debt, claims Visteon is paying a higher return to bondholders in violation of a bankruptcy rule that requires similar debts to be treated the same.
“It is a travesty that the plan forces our class to give up more than $80 million of value,” Fulcrum’s Managing Principal Matthew Hamilton said in the July 19 letter. The letter was provided to Bloomberg News by one of Visteon’s suppliers and verified by Fulcrum.
Visteon, based in Van Buren Township, Michigan, was spun off from Ford Motor Co. in 2000. It filed for bankruptcy last year, citing a drop in auto sales that hurt the company’s ability to pay its debt.
Votes on the plan are due July 30. U.S. Bankruptcy Court Judge Christopher S. Sontchi in Wilmington, Delaware, will take the tally into consideration when he decides whether to approve Visteon’s reorganization.
Creditors Divided
Visteon’s reorganization proposal has divided creditors owed at least $2.8 billion. Bondholders who are sponsoring the plan would own 95 percent of Visteon, with current shareholders getting the rest. General unsecured creditors, including the suppliers, would be paid about half what they are owed, according to court records.
The official committee representing suppliers and other unsecured creditors supports Visteon’s plan. Three of the committee members are suppliers who are getting special treatment, Hamilton said in an interview today.
“These guys are recommending that this plan go through and they are getting preferential treatment,” he said.
Visteon said in court filings that Nissan Trading Corp., Siemens Product Lifestyle Management Software Inc. and Freescale Semiconductor will have their contracts continued on the same terms as before its bankruptcy. The companies, or their affiliates, are also receiving so-called cure payments to bring the contracts current, according to court documents.
Company Payments
Visteon has agreed to let the three companies keep any payments they may have received in the 90 days before the parts maker filed bankruptcy, Hamilton said. Under the U.S. Bankruptcy code, Visteon has the option of asking a judge to force the return of those payments.
Robert Stark, an attorney for the committee, and Visteon lawyer Marc Kieselstein didn’t immediately return calls seeking comment.
Gary Seitz, an attorney for a supplier, said creditors’ push for a recovery of more than 50 percent shows that Visteon’s reorganization is a success.
“The most unusual thing about Visteon is the fact that things have really improved since they have been reorganizing,” Seitz, who represents Hua Wei Surface Decorating Technologies (Shanghai) Co. Ltd. said in an interview.
The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in U.S. Bankruptcy Court in Wilmington, Delaware, at schurch@bloomberg.net.
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