In a statement, U.S. auto parts maker Garrett Motion Inc said, it has filed for Chapter 11 bankruptcy protection, as its struggles with its heavy debt due to a payment settlement dispute with its former parent Honeywell International Inc.
In its statement Garrett said, it has entered into a “stalking horse” purchase agreement with KPS Capital Partners LP, a private equity firm, for $2.1 billion.
The “stalking horse” agreement implies that any other bids that come in must be higher than the offer made by KPS.
The agreement is subject to court approval.
Garrett is seeking court’s approval for a $250 million debtor-in-possession financing facility. During this process, it expects to operate without interruptions.
According to its filing with the U.S. Bankruptcy Court for the Southern District in New York, it has listed assets and liabilities in the range of $1 billion and $10 billion.
Automakers have been significantly affected by the coronavirus induced lockdowns since they resulted in the shuttering of vehicle factories, led to a slump in production and ravaged supply chains.
“…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 a significant long-term burden on our business,” said Chief Executive Officer Olivier Rabiller.
The company expects to emerge from the bankruptcy proceedings and complete the sale process in early 2021.
Morgan Stanley & Co Llc and Perella Weinberg Partners have been appointed as Garrett’s financial advisers.
Sullivan & Cromwell LLP and Quinn Emanuel Urquhart & Sullivan LLP are acting as its legal advisers.
AlixPartners is acting as Garrett’s restructuring adviser.