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Garrett Motion Inc. – Courts Grants Access to $100mn of Interim DIP Financing Over Objection of Former Parent Honeywell; Battle with Honeywell Over 2018 Spin-Off Looks Likely to Cast Long Shadow Over Debtors’ Cases


October 6, 2020 – The Court hearing the Garrett Motion cases issued an order authorizing the Debtors to (i) access $100.0mn of a $250.0mn debtor-in-possession (“DIP”) financing facility on an interim basis and (ii) use cash collateral [Docket No. 169]. The $150.0mn balance of the DIP facility, being provided by prepetition lenders, will be made available upon the issuance of a final DIP order. 

A hearing to consider that final DIP order is scheduled for October 21st.

This interim DIP financing order has been delayed, as was what the Debtors argued was urgently required cash, by a burgeoning conflict that looks likely to impact the Debtors throughout the pendency of their Chapter 11 cases: a face-off with Honeywell International Inc. (“Honeywell”) from which the Debtors were spun-off in 2018.

In a September 29th objection [Docket No. 103] seeking to delay the interim DIP hearing (it was delayed) and questioning (i) the Debtors' efforts to aggressively pursue an estate maximizing DIP deal and (ii) whether the Debtors' cash position necessitated DIP financing at all; Honeywell argued, that it "has uncovered facts that call into question whether the Debtors have taken sufficient steps to find the best terms reasonably available for DIP financing and whether any such financing is immediately necessary."

In a reply submitted by the Debtors [Docket No. 142] and largely echoed in a joinder filed by the DIP lenders [Docket No. 145], the Debtors cast Honeywell as spoilers with a largely ulterior motive, to "protect the value it has already extracted from the Debtors as part of the Debtors’ 2018 spinoff:" "Over the past 12 days, the Debtors, their customers, suppliers, vendors and approximately 6,750 employees have been awaiting confirmation that the Debtors have access to DIP financing.  During this period when the Debtors should have been exclusively focused on stabilizing global operations and advancing their cases, they have been addressing an onslaught of discovery demands from Honeywell International Inc. ('Honeywell'), a litigation defendant in these proceedings, including significant document discovery and 12 hours of depositions, including a five hour deposition of their global CFO on a critical day.  The result of this discovery campaign has been the delay of the interim financing hearing by two weeks, the wasteful expenditure of hundreds of thousands of dollars and, eventually, Honeywell’s objection [D.I. 103] (the 'Honeywell Objection').  But the Honeywell Objection has no merit. 

Honeywell’s campaign to impede and minimize the Debtors’ DIP financing cannot be divorced from its wholly separate agenda to protect the value it has already extracted from the Debtors as part of the Debtors’ 2018 spinoff. As the Debtors expect will be made clear in these proceedings, Honeywell is not 'the single largest unsecured creditor in these chapter 11 cases.' Far from it. Honeywell’s claim is disputed, contingent and unliquidated. In fact, Honeywell owes the Debtors money, including, at a minimum, up to €205.4 million of prepetition payments under the ASASCO indemnity and up to €32.8 million of prepetition payments related to legacy taxes, each with statutory interest.


The Debtors' requesting DIP motion states, “The Debtors’ need to obtain post-petition financing is immediate and critical in order to enable the Debtors to continue operations, to demonstrate liquidity to customers, suppliers and business partners around the world, and to administer and preserve the value of their estates during the pendency of these Chapter 11 Cases. As with many international corporations, the COVID-19 pandemic, its impact on the Debtors’ supply chain and the resulting lower production levels, plant shutdowns and a challenging demand environment have strained the Debtors liquidity position. This strain occurs at a time when many other participants in the automobile supply chain themselves face liquidity constraints and are tightening trade terms or demanding special accommodations. In addition, the Debtors operate in global markets with business partners who may not be as familiar as United States persons with the protections for administrative creditors in chapter 11 or who cannot as a practical matter be expected to comply with the automatic stay, which may create the need for more liquidity than would be required if the Debtors’ operations were entirely within the United States.

The ability of the Debtors to finance their operations, maintain business relationships, pay their employees, protect the value of their assets and pursue a strategy to maximize value for their creditors requires the availability of working capital from the DIP Facility and the ability to use 'cash collateral' within the meaning of section 363(a) of the Bankruptcy Code (“Cash Collateral”). The absence of such would immediately and irreparably harm the Debtors, their estates and their creditors and endanger the possibility of a successful administration of these Chapter 11 Cases.”

On the marketing of DIP financing, the Debtors add: "Since August 2020, the Debtors, with the assistance of PWP, have made inquiries into alternatives for financing and solicited proposals for debtor-in-possession financing from various lending institutions with experience in providing such financingand other potential sources of capital. More specifically, nine prospective third-party lenders were contacted, only one of which had significant enough interest to enter into a non-disclosure agreement with the Debtors in order to evaluate the financing opportunity. The Debtors ultimately received offers from Citibank, N.A. (‘Citibank’) and one other party, both of whom were lenders or affiliates of lenders under the Prepetition Credit Facilities, as well as an indication of interest from at least one other party. As discussed in the Mendelsohn Declaration, the Debtors’ options were limited because of the international nature of the Debtors’ assets that would form the basis of the collateral for the DIP Facility (as defined below) and the relationships that other interested lenders have with Honeywell International Inc. 

Citibank’s offer was the most viable proposal because it provided the Debtors with necessary liquidity and a path to approval by the Prepetition Lenders who would have to consent to priming liens on the collateral available to secure the DIP Facility….Concurrently with these marketing efforts, the Debtors, with the assistance of their Advisors, had been engaged in discussions with certain of the Prepetition Lenders under the Credit Facilities (the 'Ad Hoc Group'), in addition to the Ad Hoc Group’s advisors (the 'Ad Hoc Advisors'), regarding the Ad Hoc Group’s interest in providing debtor-in-possession financing or the Ad Hoc Group’s willingness to consent to third-party debtor-in-possession financing. The Ad Hoc Advisors insisted that the Ad Hoc Group would not consent to anypriming of their security interests as part of a third-party debtor-in-possession financing. None of the third-parties contacted expressed an interest in providing the Debtors with debtor-in-possession financing without a superpriority priming lien on the existing first lien interests."

Key Terms of the DIP Facility

  • Borrower: Garrett Motion Inc., a Delaware corporation
  • Guarantors: BRH LLC, Calvari Limited, Friction Materials LLC, Garrett ASASCO Inc., Garrett Borrowing LLC, Garrett Holding Company Sàrl, Garrett LX I S.à r.l., Garrett LX II S.à r.l., Garrett LX III S.à r.l., Garrett Motion Australia Pty Limited, Garrett Motion Automotive Research Mexico S. de R.L. de C.V., Garrett Motion Holdings Inc., Garrett Motion Inc., Garrett Motion International Services S.R.L., Garrett Motion Ireland A Limited, Garrett Motion Ireland B Limited, Garrett Motion Ireland C Limited, Garrett Motion Ireland Limited, Garrett Motion Italia S.r.l., Garrett Motion Japan Inc., Garrett Motion LLC, Garrett Motion México, Sociedad Anónima de Capital Variable, Garrett Motion Romania S.R.L., Garrett Motion Sàrl, Garrett Motion Slovakia s.r.o., Garrett Motion Switzerland Holdings Sàrl, Garrett Motion UK A Limited, Garrett Motion UK B Limited, Garrett Motion UK C Limited, Garrett Motion UK D Limited, Garrett Motion UK Limited, Garrett Transportation I Inc., Garrett Transportation Systems Ltd, Garrett Transportation Systems UK II Ltd, Garrett TS Ltd, Garrett Turbo Ltd. and each other subsidiary of Garrett Motion Inc. that enters into the Guarantee Agreement from time to time.
  • DIP Lenders: The lenders from time to time party to the DIP Credit Agreement.
  • DIP Agent: Citibank, N.A
  • Amount and Facility: A non-amortizing senior secured super-priority debtor-in-possession term loan facility with a maximum principal availability of $250.0mn to be funded in two borrowings as follows: (a) $100.0mn made not later than three business days following the entry of the Interim Order (the “Initial Borrowing”), and (b) $150.0mn (the “Second Borrowing”) made not later than one business day following the entry of the Final Order.
  • Interest Rate: Loans under the DIP Facility will bear interest at a rate, at Borrower’s option, equal to (x) the Base Rate plus 3.50% per annum or LIBOR (subject to a 1.00% LIBOR floor) plus 4.50% per annum, and (y) following March 31, 2021 if the Scheduled Maturity Date has been extended at such time, the Base Rate plus 4.50% per annum or LIBOR (subject to a 1.00% LIBOR floor) plus 5.50%, in each case, compounded monthly and payable every 30 days in arrears. All interest shall be calculated using a 360-day year and actual days elapsed
  • Default Interest: The applicable interest rate plus 2.00% per annum.
  • Maturity: The DIP Facility will mature on the earliest of (such earliest date, the “Maturity Date”):
  1. March 31, 2021 (the “Scheduled Maturity Date”); provided, however, that upon the Borrower’s written request received by the Agent and the Required Lenders not later than 10 business days prior to the original Scheduled Maturity Date such Scheduled Maturity Date can be extended by two months subject to (i) the payment of an extension fee to the DIP Lenders equal to 1.00% of the principal amount of the loans outstanding at the time of such extension, (ii) no default or Event of Default (as defined below) existing at the time of such extension and (iii) accuracy of the representations and warranties in all material respects at the time of such extension and after giving effect thereto;
  2. the date on which the Obligations become due and payable pursuant to the DIP Credit Agreement, whether by acceleration or otherwise;
  3. the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases;
  4. the date of consummation of a sale of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code or otherwise;
  5. 40 days after entry by the Bankruptcy Court of the Interim Order approving the DIP Facility, if the Final Order has not been entered by the Bankruptcy Court prior to the expiration of such 40-day period;the first business day after which the Interim Order expires by its terms or is terminated, unless the Final Order has been entered and become effective prior thereto;
  6. conversion of any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code or the Borrower or any Guarantor having filed a motion or other pleading seeking the conversion of the Chapter 11 Cases to Chapter 7 of the Bankruptcy Code unless otherwise consented to in writing by the Required Lenders; the date of the filing or express written support by any Debtor of a plan of reorganization that is not an Acceptable Plan (as defined below);
  7. the dismissal or termination of any of the Chapter 11 Cases unless previously consented to in writing by the Required Lenders; and
  8. the appointment of a trustee or receiver in one or more of the Chapter 11 Cases.
  • Milestones:
    • Motion for approval of bidding protections: (T+2)
    • Entry of order approving bidding protections: (T+35)
    • Motion for approval of disclosure statement: (T+35)
    • Filing plan of reorganization: (T+35)
    • Entry of order approving disclosure statement: (T+90)
    • Entry of order approving sale and confirming the Acceptable Plan: (T+150)
    • Effective date of the plan of reorganization: (T+210)
  • Fees: As agreed in the Fee Letter, dated as of September 7, 2020 (the “Fee Letter”), between the Borrower, the Citigroup Global Markets Inc., as lead arranger under the DIP Credit Agreement, the Agent shall receive (a) an arrangement fee equal to 1.00% of the aggregate principal amount of the DIP Facility, which fee was earned on the date of the Fee Letter, 30% of which fees were paid on September 8, 2020 and 70% of which fees will be due and payable on, and subject to the occurrence of, the Closing Date (as defined in the DIP Credit Agreement); and (b) in its capacity as DIP Agent, an administrative and collateral agency fee in the amount of $100,000, which is subject to the occurrence of, the Closing Date.

The loans under the DIP Credit Agreement shall be made after deduction of an original issue discount in the amount of 2.00% of the commitments on the Closing Date.

Each DIP Lender shall also receive a financing fee in the amount of 1.00% of its commitments on the Closing Date, payable in full in cash on the Closing Date.

Prepetition Indebtedness

As of the Petition date, the Debtors have approximately $1.86bn in aggregate outstanding funded indebtedness, comprised of:

  • Term Loan Facilities: The Debtors are parties to a September 2018 credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent. The Credit Agreement provides for senior secured financing of approximately the Euro equivalent of $1.45bn, consisting of (i) a seven-year senior secured first-lien term loan B loan facility, which consists of a tranche denominated in Euro of approximately €307.0mn and a tranche denominated in U.S. Dollars of approximately $417.5mn (the “Term B Facility”), (ii) a five-year senior secured first-lien term loan A facility in an aggregate principal amount of approximately €251.6mn (the “Term A Facility” and, together with the Term B Facility, the “Term Loan Facilities”) and (iii) a five-year senior secured first-lien revolving credit facility in an aggregate commitment amount of €430.0mn, with revolving loans to the Swiss Borrower to be made available in a number of currencies including Australian Dollars, Euros, Pounds Sterling, Swiss Francs, U.S. Dollars and Yen (the “Revolving Facility” and, together with the Term Loan Facilities, the “Senior Credit Facilities”). The Revolving Facility and the Term A Facility each mature on September 27, 2023. The Term B Facility matures on September 27, 2025. 

As of the Petition Date, the outstanding principal amount under the Revolving Credit Facility was $370.0mn and the outstanding principal amount under the Term Loan Facilities was approximately $1,077.0mn.

  • Senior Notes: In September 2018, Debtor LuxCo 1 and Debtor Garrett Borrowing LLC (the “Issuers”) issued €350.0mn in principal amount of senior notes (the “Senior Notes”) with Deutsche Trustee Company Limited serving as trustee (the “Indenture Trustee”), Deutsche Bank AG, as security agent and paying agent, and Deutsche Bank Luxembourg S.A., as registrar and transfer agent. Each of the Debtors guarantees the obligations under the Senior Notes. The Senior Notes bear interest at 5.125% annually and mature on October 15, 2026. 



Approximate Principal Amount Outstanding (USD equivalent)2

Revolving Facility

September 27, 2023


Term A Facility

September 27, 2023


Term B Facility – euro tranche

September 27, 2025


Term B Facility – dollar


September 27, 2025


Senior Notes

October 15, 2026




2 Assumes a conversion rate of 1.18 USD/EUR.

Initial budget (see also Schedule 1 of Docket No. 169.3)About the Debtors

According to the Debtors: "Garrett Motion is a differentiated technology leader, serving customers worldwide for more than 65 years with passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions. Garrett’s cutting-edge technology enables vehicles to become safer, and more connected, efficient and environmentally friendly. Our portfolio of turbocharging, electric boosting and automotive software solutions empowers the transportation industry to redefine and further advance motion."

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