Last week, Visteon Corporation began filing preference complaints against hundreds of current and former creditors of the company. This post will look briefly at the nature of Visteon’s business, why the company filed for bankruptcy, as well some of the likely “next steps” now that the company has filed its preference complaints.
The Bankruptcy Filing
On May 28, 2009, Visteon filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. At the time Visteon filed for bankruptcy, the company was one of the largest suppliers of automotive components to original equipment manufacturers (“OEM”) worldwide. See Visteon’s Declaration in Support of First Day Motions (the “Declaration”). Going in to bankruptcy, Visteon operated manufacturing and engineering facilities in 27 countries with annual sales reaching $9.54 billion in 2008.
Events Leading to 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.
As stated in the preference complaints, on August 31, 2010, the Bankruptcy Court confirmed Visteon’s Joint Plan of Reorganization. According to the Summons filed in the preference actions, there is a pretrial conference scheduled for August 17, 2011 at 2:00 p.m. Other dates may apply in these proceedings, so parties should consult with their counsel regarding appropriate scheduling and deadlines. The Visteon bankruptcy proceeding (including the preference actions) is before the Honorable Christopher S. Sontchi. Visteon is represented by the law firm Pachulski Stang Ziehl & Jones.