The Auto Board

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Lear prepared to file for bankruptcy next week: report
On Thursday June 25, 2009, 4:58 pm EDT

DETROIT (Reuters) - Auto parts supplier Lear Corp (LEA - News) is preparing to file for bankruptcy as soon as next week, the Wall Street Journal reported on Thursday, citing people familiar with the matter.


Reuters - The headquarters of Lear Corp., an auto parts maker, is seen in Southfield, Michigan in this February 9, ...

The news comes as Lear faces a June 30 window, through which its lenders have agreed to waive the existing defaults under its primary credit facility.

Lear, which warned in March it might have to file for bankruptcy, has been exploring alternatives to restructure its debt outside of bankruptcy over the past months.

Lear spokesman Mel Stephens declined to comment.

The Journal reported that Lear had been in talks with banks in recent days for debtor-in-possession loans, the funding companies typically use to finance their stays in bankruptcy court. JPMorgan Chase (JPM - News) and Citigroup (NYSE:C - News) will provide the bulk of the loan, according to the report.

Shares of Lear closed down 39 percent, or 34 cents, at 54 cents on the New York Stock Exchange before the news.

Southfield, Michigan-based Lear was in breach of its leverage covenants at the end of 2008 after borrowing all of the $1.2 billion available to it under the primary credit facility during the fourth quarter.

It had $3.5 billion of outstanding debt at the end of 2008, according to a filing with the Securities and Exchange Commission.

Lear, which makes seating and electrical equipment for vehicles, has suffered because of steep production cuts by General Motors Corp (Other OTC:GMGMQ.PK - News) and Ford Motor Co (NYSE:F - News), which accounted for 42 percent of its global revenue in 2008.

U.S. auto sales fell 36.5 percent in the first five months of 2009 to their lowest level in nearly three decades.

The U.S. auto parts sector, already teetering on the brink of failure, has come under further pressure after Chrysler shut down nearly all of its production for the duration of its bankruptcy reorganization.

GM, which filed for bankruptcy on June 1, has also idled 13 assembly plants in North America for as long as nine weeks starting in mid-May.

(Reporting by Soyoung Kim; Editing Bernard Orr)