Visteon Corporation (VC)

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Peg Brickley Article - VERY Interesting (Part 1) 13-Jul-10 11:45 pm By Peg Brickley
Bondholders angling to take over Visteon Corp. are worried
that a brewing confirmation battle will expose what they
actually invested to gain a foothold in the auto-parts maker’s
bankruptcy case.
The bonds are now selling above par, a sign that the prospect
of a bondholder takeover of the revived Visteon is considered
a good investment. Last year, when Visteon plunged into
Chapter 11 protection in the wake of a collapsing automotive
industry, investors were unloading the same bonds for two
cents to five cents on the dollar.
Who stands to make a killing if the bankisruptcy takeover
succeeds, has become a jealously guarded secret in Visteon’s
bankruptcy case, one that the hedge funds seem determined
to keep.
Fear that the information would leak out had lawyers for
bondholders and lawyers for banks before a judge Monday.
They had reached an impasse on rules for the exchange of
information in advance of a confirmation battle scheduled to
start Sept. 28.
“Keep it away from the experts,” bondholder attorney
Christopher Shore said at a hearing in the U.S. Bankruptcy
Court in Wilmington, Del. The lawyer, who is with White &
Case, was arguing for severe restrictions on information being
traded ahead of a Chapter 11 contest.
With banks owed $1.6 billion, shareholders and trade
creditors are preparing to battle Visteon over its bondholderbacked
plan in the fall in a contest that is expected to feature
debates over how much Visteon is really worth and who is
really backing the company.
According to the banks, Visteon’s plan is legally flawed, illadvised
and unfair. They wanted their experts to see everything
that turns up in the discovery going on ahead of the
Chapter 11 plan contest.
Judge Christopher Sontchi backed Visteon’s bondholders,
ordering that sensitive information be shared only among
attorneys. He instructed the bondholders, however, to provide
a log of the types of information that would be provided
under strict confidentiality. That way, if bank experts really
need the data on bondholder investments, the lenders can
return to court and make a case for access, he said.
“Experts sort of need to know not only what they have, but
what they don’t have,” Sontchi commented.
Monday’s debate over shielding information about who is in
line for big profits if Visteon’s plan is confirmed highlights the
touchiness of the issue in the distressed-debt industry.
Unlike major institutional shareholders of public companies
who must heed securities rules about disclosure, dealers in
distressed debt say they’re entitled to keep their holdings to
themselves. It is a point that has split the judges of the
Delaware bankruptcy court, with Sontchi allowing bondholders
to keep their secrets and Judge Mary Walrath ruling the
opposite, requiring disclosure if bondholders band together in
groups.
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