WILMINGTON, Del. (AP) — A Delaware bankruptcy court judge on Friday cleared the way for auto parts supplier Visteon Corp. to begin soliciting votes on its proposed reorganization plan, which would leave unsecured bond holders in control of the company.
Overruling objections from certain shareholders and holders of unsecured trade claims, Judge Christopher Sontchi approved documents describing Visteon's proposed reorganization plan and the process for creditors to vote on it.
Creditors will have until July 30 to vote on the plan, and Sontchi scheduled a plan confirmation trial to begin Sept. 28.
The shareholders could receive nothing under Visteon's plan, and the trade creditors would get no more than 50 cents on the dollar for their claims, which total about $48 million. Their attorneys argued that the disclosure statement outlining Visteon's plan did not contain enough information on the company's valuation, and that the plan itself was unconfirmable because of how it treats various creditor groups.
Attorneys for Visteon argued that the objections to the disclosure statement were without merit, or that they should be addressed at what promises to be a contentious plan confirmation trial stretching over two weeks.
"There may be some very interesting issues to deal with at confirmation," said Sontchi, who nevertheless said the valuation information in the disclosure statement was "more than adequate and exhaustive."
"We're headed toward litigation, and I'm aware of that," the judge added. "I wish I could head it off, but I can't head it off by ruling that the plan put forth by the debtors ... is patently unconfirmable."
Visteon, a top supplier to and former subsidiary of Ford Motor Co. based in Van Buren Township, Mich., filed for bankruptcy protection in May 2009 after automakers cut production as revenue plunged during the recession.
Under Visteon's proposed plan, unsecured bond holders would take roughly a 95 percent stake in the reorganized company by buying $300 million of stock and raising another $950 million by backing a stock rights offering to help pay off secured lenders, who hold $1.6 billion in debt and are fighting the bond holders for control of Visteon.
If the bond holders fail to raise the money, Visteon would revert to a previous plan to convert the secured lenders' debt to an 85 percent equity stake in the new company, with the rest going to the bond holders.
Before approving the disclosure statement Friday, Sontchi denied a request by the secured lenders to delay implementation of his previous order approving agreements that allow the bond holders to sponsor the stock rights offering. The lenders have challenged the ruling and asked Sontchi to delay its effect until their appeal is resolved in federal district court.
In return for arranging and leading a stock rights purchase plan, the bond holders would be entitled to more than $60 million in fees. Visteon's financial adviser, Rothschild, would receive $62.5 million.
The lenders and objecting shareholders argue that Visteon's deal with the bond holders could cost the company more than $100 million in unnecessary fees. They have offered to arrange $1.25 billion in financing without charging fees, which they claim Visteon is willing to pay in order to buy the support of bond holders so the company can emerge from bankruptcy as soon as possible.