Garrett Motion’s three-member official equity committee is in talks with Greenhill and MAEVE Group with an eye toward bringing in the two firms to advise the group in the case, according to two sources close to the situation.
The US Trustee appointed the committee on 3 November – after as many as five ad hoc shareholder groups surfaced in the case, as reported by Debtwire.
The official committee consists of Gem Partners, S. Muoio & Company and Mountaineer Master Fund.
Meanwhile, the discrete groups so far include:
- the now “unaligned” fund shareholder group, which is led by Gamco Asset Management (Gabelli) and holds a 2.4% stake in GMI;
- the group led by Owl Creek Asset Management and Warlander Asset Management, which holds a 3.5% stake in GMI;
- the shareholder group represented by Jones Day, which holds a 39% stake in GMI and is led by Cyrus Capital Partners;
- the shareholder group represented by Kasowitz Benson Torres, which has not yet filed a statement required Bankruptcy Rule 2019, but according to a letter to the US Trustee requesting the appointment of an official equity committee that Kasowitz filed on 23 October, included, as of that date: (i) Cetus Capital; (ii) Cohanzick Management; (ii) 507 Capital; (iii) Juris Partners; (iv) Gary Ribe and (v) Eric Furey; and
- although not a self-proclaimed shareholder group, the ad hoc group represented by Milbank could also be considered a shareholder group, as it consists of Centerbridge Partners and Oaktree Capital Management who, in addition to holding 15% of the senior secured 5.125% notes due 2026, holds 9% of GMI’s common stock – more than the fund shareholders group and the Proskauer group, combined.
Separately, last week (23 November), Judge Michael Wiles of the US Bankruptcy Court for the Southern District of New York denied a motion to modify the auto parts manufacturer’s exclusivity, after extensive arguments from a host of stakeholders. The trio of Centerbridge, Oaktree and Honeywell—sometimes referred to in Garrett’s case as the COH group—have joined forces to propose a possible standalone restructuring plan for Garrett’s balance sheet.
The COH proposal calls for a reorganized Garrett to sell preferred equity worth up to USD 1.15bn, while repaying in cash Garrett’s senior secured credit facility, on which the auto parts maker owed USD 1.45bn when it filed for Chapter 11 on 20 September. General unsecured creditors would receive full repayment under the COH restructuring plan, while common stockholders would have their equity interests reinstated. The alternate proposal also incorporates a potential settlement of disputes between Garrett and Honeywell that relate to asbestos liability transferred to Garrett when the company formed through a 2018 spinoff transaction by Honeywell. The proposed settlement provides for a total of USD 1.175bn in cash and preferred stock to flow to Honeywell through the end of 2034.
The COH proposal has become a leading alternative to a USD 2.6bn stalking horse bid from KPS Capital Partners, which is currently set to provide a floor for a sale process that was established when Judge Wiles approved Garrett’s bidding procedures motion, as reported. The bid procedures call for an auction on 18 December, and Garrett has said it would accept a variety of different types of offers—ranging from a sale transaction like that proposed by KPS to a potential standalone restructuring like that proposed by COH.
The USD 425m Libor+325bps term loan due 2025 is quoted today at 97.25/98.875, up from 96.35/97.8 in early November, according to Markit. Garrett’s equity traded today at USD 4.76 per share and a market cap of USD 360.75m, down 1.86% from yesterday’s close, but up 28.6% from trades in early November.
A representative from Garrett Motion declined to comment.