TKJP and its Japanese subsidiaries have commenced proceedings under the Civil Rehabilitation Act in Japan in the Tokyo District Court. TKJP’s main U.S. subsidiary, TK Holdings (TKH), and certain of its North America affiliates and subsidiaries, filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.
Takata signed an agreement in principle to sponsor a restructuring plan for the sale of substantially all of the company’s global assets and operations to Sterling Heights, MI-based Key Safety Systems (KSS) for an aggregate purchase price of approximately ¥175 billion ($1.588 billion), subject to certain adjustments at closing.
Proceeds of sale will be used to address PSAN related costs and liabilities and capitalize RTK. Takata intends to use the Civil Rehabilitation and Chapter 11 processes to address the costs and liabilities related to airbag inflator recalls, including to fund its remaining obligations under the terms of the plea agreement with the U.S. Department of Justice that was announced on January 13, 2017 and consent orders entered into by Takata with the National Highway Traffic Safety Administration.
Pursuant to the DOJ plea agreement, Takata paid $25 million as a fine to the DOJ and was required to fund two restitution funds: (1) a fund of $125 million to meet liabilities to current or future personal injury claimants and (2) a fund of $850 million to satisfy a portion of the claims of OEM customers who purchased airbags containing phase-stabilized ammonium nitrate (PSAN) airbag inflators.
After setting aside sufficient funds to capitalize Restructured Takata (RTK) following completion of the Chapter 11 process, any remaining sale proceeds after satisfaction of the foregoing obligations and the payment of other claims entitled to priority or payment in full would be used to fund recoveries to holders of general unsecured claims.
Under the sale agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and operations that relate to the company’s manufacturing and sale of PSAN airbag inflators. It is expected that Takata’s PSAN-related operations will be run by a reorganized Takata following the transaction closing and eventually will be wound down.
By combining substantially all of Takata with KSS, the transaction would form a global safety-supply auto parts company with approximately 60,000 employees in 23 countries focused on serving customers and providing superior products and innovation in the rapidly evolving auto safety industry.
The Japanese OEMs have committed to provide Takata with valuable accommodations and liquidity enhancements during the Civil Rehabilitation and the company is working with the customer group on an agreement to do so on a global basis. Takata intends to use the Civil Rehabilitation Act and Chapter 11 processes to continue to work with its customer group and KSS to finalize and execute restructuring support agreements. The transaction with KSS would also be subject to approval by the Tokyo Court and the Delaware Court, as well as a number of other conditions, including regulatory and other third-party approvals.