According to an 8K filed with the SEC, JPMorgan Chase Bank is serving as administrative agent on an amendment to Garrett Motion’s credit agreement. The amendment provides covenant relief for up to a two-year period through June 30, 2022.
“The modifications to our credit agreement significantly enhance Garrett’s financial flexibility to weather the current pandemic-induced economic slowdown,” Olivier Rabiller, president and CEO of Garrett Motion, said. “We appreciate the support of our lending group as we continue to take decisive actions to operate in this challenging environment. Going forward, our focus remains on ensuring the long-term financial health of our company while meeting customer commitments, supporting our local communities, and safeguarding the health and well-being of our employees.”
Garrett’s credit agreement is comprised of a (i) senior secured first-lien term B loan facility, which consists of a tranche denominated in Euro of €375 million and a tranche denominated in U.S. dollars of $425 million, (ii) senior secured first-lien term A loan facility in an aggregate principal amount of €330 million ($371.34 million), and (iii) senior secured first-lien revolving credit facility in an aggregate principal amount of €430 million ($483.87 million) (all facility amounts at inception). Garrett has no significant debt maturities before September 2023.
In connection with Garrett accomplishing this agreement with its lenders, Honeywell withdrew its previously issued notice of default. Garrett believes that Honeywell’s action had no merit and was an improper attempt to interfere with Garrett’s contractual arrangements with its lenders and to delay Garrett’s ongoing litigation against Honeywell concerning a subordinated asbestos indemnity imposed on Garrett in connection with the 2018 spin-off.
“While the successful completion of the bank amendment is an important step in Garrett Motion sustaining its liquidity, we will continue to explore further opportunities to optimize our capitalization to ensure that the business is positioned for success in an evolving environment. In particular, this crisis has exacerbated the challenges associated with operating under the onerous Honeywell Subordinated Indemnity and Mandatory Transition Tax (MTT) liabilities, and highlights the fact that the current situation with Honeywell continues to adversely impact our overall strategic and financial flexibility.”
As of March 31, 2020, the liability on Garrett’s balance sheet associated with Honeywell totaled $1,304 million, including the subordinated indemnity liability, MTT payments and other related tax matters.
“Despite the near-term disruption across the automotive industry and global economy, it is important to remember that the positive long-term fundamentals of our business remain intact,” Rabiller said. “Garrett has excelled as an industry leader for over 65 years, delivering critical cutting-edge technologies to major automakers worldwide. Going forward, automakers will likely encounter even tougher regulations and technical challenges after the crisis, and Garrett will bring them a wide range of differentiated products and solutions.”
Garrett Motion is a differentiated technology company that provides passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions.