Visteon Corporation (VC)

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Peg Brickley Article - VERY Interesting (Part 2) 13-Jul-10 11:46 pm Legally, $1 million worth of Visteon bonds is counted as $1
million worth of Visteon bonds in bankruptcy court, even if
the investor paid only $20,000 for it in the distressed-debt
market. In an open court fight against public-company shareholders,
however, the Visteon bondholders could run up
against arguments that they have less at risk than many others
who backed the parts maker.
Bondholders are owed $870 million and have agreed to put
up an additional $1.25 billion to finance the Chapter 11
takeover. The money will be used to pay down some of
Visteon’s bank debt, while the company refinances the rest.
Visteon’s banks are operating under the threat that if they vote
“no” on the bondholder plan, they can be forced to leave
some of their existing loans in place. That means a favorable
interest rate for Visteon, and suppressed profits for lenders
who had expected for months to be able to take over most of
the company.
Visteon’s existing Chapter 11 plan replaces one that would
have give the banks ownership of 85% of a reorganized parts
maker, and bondholders the remainder.
Once bondholders committed to provide cash to pay off part
of the bank debt, however, the company rewrote its Chapter
11 plan.
Shareholders were left with nothing under both versions of
Visteon’s Chapter 11 plan until recently. The latest version
offers them a 2% share of the bondholder-backed investment
opportunity.
Lawyers for shareholders say Visteon’s bondholders are
getting an unfair bargain, and some of them have asked for
court permission to put up a plan of their own for the
company.
Visteon also faces trouble with trade creditors, who say they’re
being cheated out of the right to invest in a reorganized
company, which has seen its business prospects rise with the
return to normal conditions in the auto industry.
Even though their debt ranks alongside the bonds in the bankruptcy
payment scheme, they are getting cash in partial
payment, instead of a share in the company, say trade
creditors Fulcrum Credit Partners LLC, Hain Capital Group
and Liquidity Solutions Inc.
The official committee of unsecured creditors has accused
trade creditors of conducting a “malicious solicitation
campaign,” by contending it has the voting power to keep
Visteon’s plan from winning court approval. Votes are due in
by July 30, and unsecured creditors are calling for a probe of
the trade creditors, in order to make sure the balloting is not
tainted by “highly suspect” information.
glta