Justice Sirikah

Light Comes Into Sight at the End of March, 2010 as Court Approves Financing for Visteon Corporation (PinkSheets: VSTNQ)

by Justice Sirikah November 16, 2009
5vstn_logo.jpgCash-strapped automotive parts supplier, Visteon Corporation (PinkSheets: VSTNQ) moved up a tad on the stock market on Friday in rhythm with the bankruptcy court ruling that gave the company access to $150 million worth of debtor-in-possession (DIP) financing to fund ongoing operations while streamlining under Chapter 11.  This marks the first time in post-bankruptcy submission that Visteon has called for additional liquidity. Hitherto, the firm has helped itself on cash held as collateral for its indebtedness.

  Without the facility Visteon ran the risk of falling short on the least possible amount required to keep the business in operation by March, next year. Going by the statement filed with the bankruptcy court last week, the company’s executives and analysts agreed that the parts maker’s backlog would put pressure on its cash on hand, unless if additional financial backing was made available. But before the court prevailed, the committee of unsecured creditors proved to be the last hurdle, arguing that there was no need to secure emergency funds.

  Under the terms of the transaction which must eventually see Visteon withdrawing $75 million when the deal is sealed, with the remainder set to be drawn at the company’s discretion, it is required to relocate its Michigan and Mexico businesses to other suppliers in return of $31 million from Chrysler. The court also okayed a similar deal between Visteon and the North American operations of Nissan Motor Company Ltd. (PinkSheets: NSANY), with a potential of more than $30 million for the auto parts company.

  In September, the manufacturer of auto systems and components reached yet another comparable arrangement with GM in line with its plans to resurface from the bankruptcy protection in which it had entered in May with about $4.6 billion of assets against a debt of $5.3 billion. It relinquished its contracts for fuel tanks as well as lighting and climate control systems while it got $22 million from the carmaker.

  Visteon recently reported a third quarter net loss of $38 million ($0.29 per share), on consolidated revenues of $1.73 billion. The results compares to a net loss of $188 million ($1.45 per share) and revenues of $2.12 billion for the same period a year earlier. The net loss improvement reflected cost saving benefits as the rest of the industry continues to strive under severe conditions. VSTNQ shares closed 2.24 percent higher to $0.07 in the last trading session.

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