Visteon Corporation  filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware on May 28, 2009.  According to Visteon’s Declaration in Support of First Day Motions (the “Declaration”), Visteon is one of the largest suppliers of automotive components to original equipment manufacturers (“OEM”) worldwide.  With manufacturing and engineering facilities in 27 countries, Visteon’s sales reached $9.54 billion in 2008.

Ford’s Role in Visteon’s Bankruptcy

In 2000, Visteon spun-off from Ford Motor Company after decades as a parts division of Ford.  By 2006, Visteon began a two year restructuring of its business that would result in Visteon reducing its workforce by 15,000 employees.  During its pre-bankruptcy restructuring,  Visteon was able to close or sell-off over 30 of its facilities, saving hundreds of millions of dollars in engineering and administrative costs.

Despite is aggressive restructuring,  Visteon suffered considerable losses due to the global recession.  As stated in its Declaration, Visteon contends that the decline in the automotive industry caused it to receive a “going concern” opinion from its auditors that constituted an event of default under its secured credit facility.  In response to its going concern default, Ford, a major Visteon customer, agreed to take an assignment of Visteon’s working capital loan agreement on May 13, 2009.  Recognizing the importance of Visteon to its own business, Ford agreed to support debtor-in-possession financing for Visteon’s bankruptcy proceeding.

Visteon’s Creditors

It is always helpful to know who a debtor’s creditors are to understand the dynamics of a particular bankruptcy.  According to Visteon’s Petition for Bankruptcy,  the Bank of New York serves as administrative agent for three different bonds:  one issue for $450 million and two separate bond issues for $206 million.  Visteon lists the following organizations as holding the ten largest unsecured trade claims:

  1. Jabil Circuit, Inc.  … $7.0 million
  2. IBM Corp. … $5.7 million
  3. Freescale Semiconductor … $4.4 million
  4. Ogura Corp. … $3.1 million
  5. QAD, Inc. … $2.4 million
  6. SL Alabama … $2.3 million
  7. AT&T … $2.1 million
  8. Hollingsworth Logistics … $1.9 million
  9. Brown Corp. … $1.9 million
  10. Unigraphics Solutions … $1.7 million

This bankruptcy proceeding is before the Honorable Christopher S. Sontchi.  To read a recent decision of Judge Sontchi in an another bankruptcy proceeding (the American Home Mortgage bankruptcy), click here.