Lear Files For Bankruptcy, Icahn Slaughters Calf

The company which two years ago activist investor Carl Icahn thought was a steal at $37.25 just filed for bankruptcy (needless to say Suite #4700 at 767 Fifth Avenue is right now painted with sacrificial lamb blood: janitors who are told to clean it all up by tomorrow have just quit). In a press release the Southfield, MI parts supplier said it was hoping for a prompt Chapter 11 process and that it had already received a $500 million DIP compliments of JP Morgan and Citi (the latter probably has to pretend it is still a bank of some sort).

Lear Corporation (NYSE: LEA), a leading global supplier of automotive seating systems, electrical distribution systems and electronic products, announced today that the Company has reached an agreement in principle regarding a consensual debt restructuring with steering committees representing its secured lenders and its bondholders. The Company plans to commence shortly the proposed restructuring under court supervision pursuant to a voluntary bankruptcy filing under Chapter 11 of the United States Bankruptcy Code by the Company and certain of its U.S. and Canadian subsidiaries. The agreement in principle provides that, subject to certain limited exceptions, Lear's trade creditors will be paid in full.

Unfortunately, the Company seems to not have heard that the recession is over:

Given the unprecedented economic downturn and corresponding decline in global automobile production volumes, as well as continued difficult conditions in credit markets generally, Lear's Board of Directors concluded that in order to protect the long-term business interests of the Company, this protective action was the fastest and most effective way to delever its capital structure. During the reorganization process, Lear is committed to continuing to deliver to its customers the superior quality, service and innovation they expect.

Furthermore, an "expedited" restructuring will be contingent on whether the company's bondholders, in turn, have heard about the recession ending:

The Company's restructuring plan has the support of a majority of the members of a steering committee of the Company's secured lenders and a steering committee of bondholders acting on behalf of an ad hoc group of bondholders The Company is seeking support for its restructuring plan from additional lenders and bondholders. However, no assurance can be given as to the level of additional support for the restructuring the Company ultimately will be able to obtain from its lenders and bondholders.

Lastly, it is good to see that Citi is using that juicy TARP cash to lengthen the miserable existence of yet another doomed concern:

The Company has received commitments from a syndicate of secured lenders, led by J.P. Morgan and Citigroup, for $500 million in new money debtor-in-possession (DIP) financing. The proposed DIP financing, subject to customary conditions, provides additional financial flexibility that supplements Lear's significant existing cash balances. Additionally, the DIP agreement provides that, subject to certain conditions, the DIP financing will convert into exit financing with a three-year term upon Lear's emergence from Chapter 11.

Zero Hedge is now taking bets on whether the recovery in the ISDA CDS auction will be above or below 10 cents.

The Company anticipates being in default under its 8.50% Senior Notes due in 2013 and 8.75% Senior Notes due in 2016, as the 30-day grace period applicable to the semi-annual interest payment due on such notes will expire on July 2, 2009. In addition, in light of the pending reorganization plan, the Company has not made principal and interest payments due under its senior credit facility on June 30th.

Tomorrow should be an interesting day for the stock. If GM is any indication, look for the stock to jump from $0.48 to $48.00 on the grandmother of all short squeezes. Sphere: Related Content

Bookmark this post with:

• 
• 
• 
• 
• 
• 
• 
• 
• 

Lear Set To File For Bankruptcy

Look at the chart below and memorize it well. The fate of countless other high beta, uber-garbage stocks that are lately flying like crazy, schizophrenic Hindenburgs will soon follow in the same pattern. In this particular case: Lear - the nth autosupplier which according to the WSJ is about to file for bankruptcy. The drop from $2.50 to $0.50 in two weeks should be considered all too carefully by all who listen to Cramer and the "buy stocks so GE can go up and pay us our salary for one more year at least" brigade. If you bougt Lear at the peak in the last month, congrats: you have lost 75% of your investment. If nothing else, this simply demonstrates that no matter how hard Goldman or JPM or whoever buys futures and tries to fool investors into a false sense of confidence, fundamentals always catch up with you...and these days it is sooner, not later.

Sphere: Related Content

Bookmark this post with:

• 
• 
• 
• 
• 
• 
• 
• 
• 

Auto Supplier Shock Spreading, Now TRW

Last week it was Visteon, yesterday it was Lear, today it's TRW. The auto supplier whose secured credit facility has been on an unprecedented tear recently, filed an 8-K earlier announcing it will likely breach covenants, and not some time in 2013 (the same year the S&P is using for its fwd multiple calculation), but Q2! In other words, they have a mere 30 days before TRW will be the next auto supplier casualty. It is interesting that TRW management waited so long, before a) announcing just how bad things are and b) taking proactive steps to fix things. From the 8-K:

On June 2, 2009, TRW Automotive Holdings Corp. (the “Company”) announced that it has initiated the process with its bank group to amend its primary credit facility. In light of the current industry conditions, it is unlikely that the Company will be in compliance with the financial covenants of its existing credit facility at the end of the second quarter of 2009 and, therefore, is seeking to amend certain terms of its primary credit agreement to position the Company for future covenant compliance through the current downturn. The Company expects to complete the amendment process prior to the end of the second quarter 2009.

Recently TRW said it had fully drawn down its revolver, with utilization now sitting at $1.3 billion. The credit facility is $2.5 billion in total, underwritten by upgrade specialists Merrill Lynch/BofA and JPM. It will be interesting to see if the Merrill auto equities team takes a page out of the REIT book, and upgrades TRW equity to "Once In A Lifetime Dodecatuple Super Strong Buy", with a $100 price target, generating a short squeeze, doing a follow on, pocketing 10% of the equity offering and having management use the proceeds to pay down its credit facility. Stranger things have been seen in the market recently. Sphere: Related Content

Bookmark this post with:

• 
• 
• 
• 
• 
• 
• 
• 
• 

Lear Chooses Not To Pay Bond Interest, Stock Shoots Higher

When a stock goes up by about 10% on a bankruptcy preannouncement, there is nothing much more to be said. In a press release earlier, Lear, critical D-3 parts supplier, and target of a Carl Icahn takeover attempt in 2007 (I bet shareholders who voted down that $37.25 offer back then are feeling really retarded right now), has announced that, just like all other nationalized car companies, it has decided it feels no need to pay its bonds and has entered a 30 day grace period (if the payment has still not been made at the end of the period, add one more company to Taxpayer Capital LP's portfolio).

"The Company is utilizing the 30-day grace period applicable to the interest payments while it continues discussions regarding a capital restructuring with its lenders and others. Under the applicable indentures relating to the Senior Notes, the use of the 30-day grace period does not constitute a default that permits acceleration of the Senior Notes or any other indebtedness."

And, as is the case in bizarro world, the stock is shooting straight up. Sphere: Related Content

Bookmark this post with:

• 
• 
• 
• 
• 
• 
• 
• 
•