Lear Corp. (LEA) filed Quarterly Report for the period ended 2009-10-03.
Lear Corporation one of the largest independent automotive suppliers in the world. It is also one of the leading suppliers of automotive interior systems in automotive interior market and suppliers in the automotive electrical distribution systems market. It has established in-house capabilities in all five principal segments of the automotive interior market: seat systems; flooring and acoustic systems; door panels; headliners; and instrument panels. Lear Corp. has a market cap of $30.23 million; its shares were traded at around $0.48 .
Highlight of Business Operations:
The Plan provides that to the extent that we have minimum liquidity on the Effective Date in excess of $1.0 billion, subject to certain accruals and adjustments, the amount of such excess would be utilized to prepay, first, the Series A Preferred Stock in an aggregate stated value of up to $50 million; then, the Second Lien Facility in an aggregate principal amount of up to $50 million; and thereafter, reduce the First Lien Facility. We expect to have liquidity, after giving effect to certain accruals and adjustments, of between $1.2 billion and $1.3 billion as of the Effective Date. In the event that we have such liquidity, in accordance with the Plan and the Confirmation Order, we will apply our cash as of the Effective Date in excess of the $1.0 billion of minimum liquidity as follows: (i) $50 million of cash in aggregate will be paid to the Lenders, thereby reducing the amount of the Series A Preferred Stock to be issued on the Effective Date from $500 million to $450 million; (ii) $50 million of cash will be used to prepay the second lien term loans under the Second Lien Facility, thereby reducing the principal amount of the Second Lien Facility from $600 million to $550 million; and (iii) the remaining amount of such excess cash, estimated to be between $100 million and $200 million, will be used to reduce the principal amount of the First Lien Facility.
amount of $500 million (the “DIP Facility”). On August 4, 2009, the Bankruptcy Court entered an order approving the DIP Agreement. The closing of the DIP Facility occurred on August 5, 2009, and the Debtors subsequently received proceeds of $500 million, net of related fees and expenses of $37 million, related to available debtor-in-possession financing.
On October 23, 2009, we entered into a first lien credit agreement (the “First Lien Agreement”) by and among Lear, certain financial institutions party thereto and JPMorgan Chase Bank, N.A., as administrative agent. Pursuant to the terms of the First Lien Agreement, on the Effective Date, we will have access to an initial funding in an amount of $200 million (the “Closing Date Draw”) and a delayed draw funding in an amount of up to $200 million (the “Delayed Draw” and together with the Closing Date Draw, the “First Lien Facility”) to be drawn not later than 35 days after the Closing Date Draw. The amount of the Delayed Draw will be determined based on the terms of the Plan and our liquidity needs. In addition to the foregoing, upon satisfaction of certain conditions, we will have the right to raise additional funds to increase the amount available under the First Lien Facility up to an aggregate amount of $600 million, subject to certain conditions. The proceeds of the First Lien Facility will be used to satisfy amounts outstanding under the DIP Agreement and for general corporate purposes.
In 2005, we initiated a three-year restructuring strategy to (i) eliminate excess capacity and lower our operating costs, (ii) streamline our organizational structure and reposition our business for improved long-term profitability and (iii) better align our manufacturing capacity with the changing needs of our customers. In light of industry conditions and customer announcements, we expanded this strategy in 2008. Through the end of 2008, we incurred pretax restructuring costs of approximately $528 million and related manufacturing inefficiency charges of approximately $52 million.
We have continued to restructure our global operations and to aggressively reduce our costs in 2009 and expect continued accelerated restructuring actions and related investments for at least the next several years. In the first nine months of 2009, we recorded restructuring charges of approximately $86 million and related manufacturing inefficiency charges of approximately $15 million.
In the three and nine months ended October 3, 2009, we incurred $39 million of fees and expenses related to our reorganization under Chapter 11. In addition, in the three and nine months ended October 3, 2009, we incurred $3 million and $24 million of fees and expenses related to our capital restructuring efforts prior to the Chapter 11 Cases. In the three and nine months ended October 3, 2009, we recognized impairment charges of $15 million and $42 million, respectively, related to our investments in equity affiliates. In addition, in the three and nine months ended October 3, 2009, we incurred a loss of $10 million related to a transaction with an affiliate. In the three and nine months ended October 3, 2009, we recognized tax expense of $4 million and tax benefits of ($14) million, respectively, related to changes in recorded tax reserves, as well as tax benefits of ($3) million and tax expense of $7 million, respectively, related to changes in valuation allowances in certain foreign subsidiaries.
LEA is in the portfolios of Richard Pzena of Pzena Investment Management LLC.
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