Visteon Managers Keep Reorganization Control Over Shareholder Protest
Visteon Corp. shareholders can’t propose their own plan to reorganize the bankrupt car-parts maker after a judge renewed management’s exclusive control of the process.
U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Delaware, today granted Visteon’s request to extend its right to seek court approval of a reorganization plan. Company managers and Visteon bondholders designed a plan that would cancel the current shares and issue new stock, 95 percent of which would go to bondholders.
“Lifting exclusivity in this case will not accomplish anything except creating chaos,” Sontchi said.
The shareholders argued that Van Buren Township, Michigan- based Visteon is solvent and can pay all its debts. They asked Sontchi to end the company’s exclusivity rights so they could pursue their own proposal.
Shareholders want to try to raise money to pay lenders owed $1.63 billion and reinstate the company’s bond debt, attorney Martin J. Bienenstock said in court.
Sontchi denied the shareholder motion and granted the company’s request to extend its so-called exclusivity rights until Aug. 28.
Bienenstock represents a committee of investors who own about 12 percent of Visteon’s stock, including hedge-fund manager Davidson Kempner Institutional Partners LP. The committee also wants an examiner appointed to investigate whether company managers are wrongly ignoring an alternative reorganization proposal.
A separate group of shareholders, led by Cypress Management Master LP, Lenado Capital Advisors LLC and Goshawk Capital Corp., asked Sontchi to appoint an official committee to represent them, which would require Visteon to pay their legal bills and give them a more formal voice in the bankruptcy case.
Sontchi will consider both of those shareholder proposals later today.
Since Visteon sought bankruptcy court protection last year, its stock and bonds have risen as investors bet the company can successfully reorganize.
Visteon’s 8.25 percent bonds due Aug. 1 rose more than 4 percent to 112 cents on the dollar at 12:37 p.m., according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The company, which was spun off from Ford Motor Co. in 2000, filed for bankruptcy in May 2009, listing assets of $4.58 billion and debt of $5.32 billion in Chapter 11 documents.
Management’s plan would raise $1.25 billion from bondholders under a new stock offering. Should bondholders fail to raise the cash necessary for that deal, lenders would be given 85 percent of the new stock in exchange for canceling what they are owed. The rest of the stock would go to the bondholders.
Under both options, shareholders would get nothing back.
The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington).