Auto Parts Supplier Marelli Files for Chapter 11 Bankruptcy
About '80% of the company's lenders have signed an agreement to support the restructuring, which will deleverage Marelli's balance sheet and strengthen its liquidity position,' Marelli said in a statement. It added it does not expect the process to have any operational impact on its business.
Marelli has received a commitment for $1.1 billion in debtor-in-possession financing from its lenders. Upon Court approval, this amount, coupled with cash generated from the company's ongoing operations, is 'expected to provide sufficient liquidity to support the company through the Chapter 11 process,' Marelli said.
The auto parts supplier has been caught up in industry upheaval as electrification and automation force global carmakers to shift their strategy to cope with declining sales in key markets.
One person familiar with the matter said earlier this week that global investment firm Strategic Value Partners LLC, led by Victor Khosla, will effectively become the new owner of Marelli. KKR & Co., the US-based private equity group that created Marelli in 2019 by merging its Calsonic Kansei and Magneti Marelli units, will transfer its shares to the consortium of lenders as part of the proposed deal, the person said.
Representatives for KKR declined to comment. Strategic Value Partners didn't respond to an email seeking comment.
Marelli, which employs more than 50,000 people, had sought unsuccessfully to restructure over the past few years as orders from customers fell. The manufacturer based in Saitama, Japan, operates around 170 facilities globally that supply lighting systems, air conditioning, electric motors, suspensions and other components to carmakers.
Apart from SVP, Marelli's creditors include Deutsche Bank AG, Mizuho Financial Group Inc. and other lenders. The consortium also includes Seoul-based MBK Partners Ltd. and New York's Fortress Investment Group LLC, the person said.
Marelli filed for court-led rehabilitation in 2022 and at that time, its total debt was around ¥1.1 trillion ($7.6 billion), the most ever for a Japanese manufacturer. That was since reduced to around ¥650 billion.
'After careful review of the company's strategic alternatives, we have determined that entering the Chapter 11 process is the best path to strengthen Marelli's balance sheet by converting debt to equity,' Marelli CEO David Slump said in the statement. 'Taking this action now provides access to new liquidity to fund our long-term growth and innovation pipeline.'
(Updates with detail from official statement.)
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