Automotive parts supplier Lear filed for bankruptcy protection on Tuesday after receiving support it needed from lenders and bondholders to reorganize its struggling business.
The move had been expected from the maker of vehicle seats and electronics, which missed an interest payment on its bond debt last week and revealed its intention to seek Chapter 11 bankruptcy protection from its creditors. The Southfield, Mich.-based company made the filing in the U.S. Bankruptcy Court for the Southern District of New York.
It listed $1.27 billion in assets and $4.54 billion in liabilities. Subsidiaries outside the U.S. and Canada are not part of the filings, the company said.
"We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," CEO Bob Rossiter said in a statement.
Attorneys for Lear were slated to ask U.S. Judge Allan Gropper for approval of typical "first day motions" including permission to pay pre-bankruptcy wages, taxes and certain obligations to its customers.
Under Chapter 11 reorganization, a company can stay in operation under court protection while it sheds debts and unprofitable assets.
Lear is the first major automotive parts maker to seek court protection since Visteon, the former parts arm of Ford, filed in May. Auto parts suppliers have been hammered by the economic downturn as consumers continue to shun new car purchases and automakers slash production.
The Chapter 11 filings by General Motors and Chrysler and the idling of most of their factories has dealt a particularly hard blow to the auto supply base.
Lear has been particularly hard hit by the slump. It is heavily dependent on the struggling North American and European auto markets, with 36% of its sales coming from North America and 49% coming from Europe.
Lear, which posted $13.6 billion in sales for 2008, is a key supplier for both GM and Ford. The pair represent the company's two largest customers and account for a combined 40% of its sales.
On Tuesday, Lear said it is hoping for an "expedited" bankruptcy process. The parts maker said it has support from more than 50% of its bondholders and about 69% of its secured lenders for its reorganization plan, which it plans to submit to the bankruptcy court within 60 days.
In its bankruptcy filing, it listed its top 50 creditors, with many of the largest including its bondholders and suppliers. Its biggest creditor is the Bank of New York Mellon, which holds nearly $1.3 billion in bond debt. Among its parts suppliers, Milwaukee-based Johnson Controls Inc. was the largest with about $5 million owed.
Shares of Lear, which trade on over-the-counter markets since the New York Stock Exchange de-listed the stock, have plunged over the last year after the automobile market began slumping and the company began racking up quarterly losses. Shares closed Monday at 29 cents and fell 2% to 28 cents in Tuesday morning trading. During a bankruptcy proceeding, common shareholders are typically wiped out.
It announced it was preparing to file for bankruptcy protection last week after a grace period expired on a $38 million interest payment that would service its 8.5% senior notes due 2013 and its 8.75% senior notes due 2016
It previously received a commitment for $500 million in "debtor-in-possession" loans to finance its bankruptcy from a group of lenders led by J.P. Morgan and Citigroup. It has asked the bankruptcy court to allow it to continue to provide pay and benefits for its workers without interruption and to continue to allow it to provide payments for its U.S. and Canada pensions.
AP business writer Michelle Chapman and AP auto writer Bree Fowler contributed to this report.