Garrett Motion Inc., operating under the protection of the U.S. Bankruptcy Code Chapter 11, has issued a $200 million secured super-priority debtor-in-possession, or DIP, term loan, according to S&P Global Ratings.
The agency has assigned a BBB- rating, on a point-in-time basis, to the DIP loan. It assesses the company's capacity to repay the DIP debt at emergence from bankruptcy as strong, since coverage is higher than 250%, it says.
The automotive supplier filed for voluntary Chapter 11 at the U.S. Bankruptcy Court for the Southern District of New York on Sept. 20, 2020, amid rising leverage due to industry disruption, which has put pressure on the firm.
The filing came in connection with a stalking horse rescue offer by private equity firm KPS Capital Partners. The offer was initially for $2.1 billion, but KPS recently delivered a revised proposal in which it agreed to, among other things, increase its bid by $500 million to $2.6 billion.
On Oct. 23, Garrett obtained court approval for bidding procedures for a competitive process to either sell itself or raise equity capital for a stand-alone plan of reorganization. The court also approved bidding protections that entitle KPS to certain fees and reimbursements should Garrett terminate the stalking horse agreement.
Garrett anticipates emerging from Chapter 11 and completing the sale process in early 2021.
Morgan Stanley & Co. LLC and Perella Weinberg Partners are serving as financial advisers, Sullivan & Cromwell LLP and Quinn Emanuel Urquhart & Sullivan LLP are legal advisers, and AlixPartners is restructuring adviser to Garrett Motion.
In June, Garrett passed an amendment on its term loan B, term loan A and revolving credit facility following a process led by J.P. Morgan. The amendment covered a covenant relief and applies to the firm's €307 million and $419 million TLBs due 2025, the €430 million revolver due 2023, and the €252 million TLA due 2023.
Garrett said at the end of June that it had ample liquidity to support its current and future commitments to customers, suppliers, employees and other business partners without interruption, with available cash and undrawn revolver capacity totaling $482 million.
The borrower completed its cross-border TLBs in September 2018 to support the firm's spinoff from Honeywell. The euro piece was originally priced at E+275 with a 0% floor, while the dollar tranche came at L+250 with a 0% Libor floor. The TLA and the revolver were also placed at that time, to back the spinoff.
Garrett Motion designs, manufactures and sells highly engineered turbocharger and electric-boosting technologies for light and commercial vehicle OEMs and the aftermarket.