Garrett Motion secured bankruptcy court approval of bidding procedures for a competitive process to either sell the business or raise equity capital for a standalone plan of reorganization.
The process will continue over the next seven weeks and is expected to conclude at an auction in December. The bidding procedures permit Garrett to explore all potential options, including sales of Garrett for cash, sales of Garrett with co-investment rights offered to stakeholders and stand-alone plans of reorganization.
Garrett obtained approval of stalking horse bidding protections for affiliates of KPS Capital Partners, including a $63 million termination fee and expense reimbursement (subject to a limit of $21 million).
On Sept. 20, 2020, Garrett and certain affiliates of KPS entered into a share and asset purchase agreement in connection with the proposed purchase of Garrett’s business, and on Oct. 19, 2020, KPS delivered a revised proposal in which KPS agreed to increase its stalking horse bid by $500 million to $2.6 billion. These stalking horse bidding protections will be payable by Garrett if the SAPA is terminated because Garrett decides to pursue an alternative or in certain other circumstances.
The bidding protections preserve the stalking horse bid, which provides for:
- The purchase by a new company organized by KPS (New Garrett) of substantially all of the assets of the debtors and the economic value of ASASCO’s litigation claims and defenses against Honeywell for aggregate purchase consideration of $2.6 billion
- The re-listing of New Garrett as a public company
- The opportunity for Garrett’s current stockholders to co-invest up to $350 million in the purchase of common stock of New Garrett on same terms as KPS.
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The debtors intend to proceed with the competitive process and actively solicit alternatives to the stalking horse bid prior to the auction, including the continued development of the proposals received from Centerbridge Partners and Oaktree Capital Management, as well as the development of other potential stand-alone plan opportunities that provide investment opportunities to Garrett’s stockholders.
“Garrett is pleased to have obtained the recent relief from the Court, including approval of our debtor-in-possession financing and customer, supplier and vendor programs, as well as the auction procedures and the preservation of the current $2.6 billion bid by KPS,” Olivier Rabiller, CEO of Garrett, said. “We look forward to working with the various bidders, our stockholder groups and all of our stakeholders on a robust competitive process and prompt emergence from Chapter 11 in the first quarter of 2021.”
Garrett Motion anticipates emerging from its Chapter 11 proceedings in early 2021.
Morgan Stanley and Perella Weinberg Partners are serving as financial advisors, Sullivan & Cromwell and Quinn Emanuel Urquhart & Sullivan are serving as legal advisors, and AlixPartners is serving as restructuring advisor to Garrett Motion.
Garrett Motion is a provider of technology-focused vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions.
