Visteon lenders urge bankruptcy judge to reject company pact with bond holders seeking control

Visteon lenders oppose bondholder agreement

WILMINGTON, Del. — A Delaware bankruptcy judge is weighing whether to approve key financial arrangements between auto parts supplier Visteon Corp. and bond holders who are fighting secured lenders for control of the company.

Visteon, based in Van Buren Township, Mich., wants the court to approve agreements with senior note holders and let it pay tens of millions of dollars in fees associated with those agreements.

After testimony and attorney arguments Tuesday, Judge Christopher Sontchi said he would issue an oral ruling Thursday.

Visteon, a top supplier to and former subsidiary of Ford Motor Co., filed for bankruptcy protection in May 2009 after automakers cut production as revenue plunged during the recession.

Under Visteon’s latest proposed reorganization plan, unsecured bond holders would take a 95 percent stake in the reorganized company by buying $300 million in stock and raising another $950 million through a stock rights offering to help pay off secured lenders owed $1.6 billion.

In return for arranging the stock purchase plan, the bond holders would receive more than $60 million in fees.

“We’re taking a huge amount of risk here,” said J. Christopher Shore, an attorney for the bond holders. “For that, we want to be compensated.”

If the bond holders can’t raise the money, Visteon would revert to an earlier plan under which the lenders would have their debt converted into an 85 percent equity stake in the new company, with the rest going to bond holders.

Along with the secured lenders, shareholders with 17 percent of Visteon’s equity are challenging the company’s deal with bond holders, saying it would cost Visteon more than $100 million in unnecessary fees to obtain the financing offered by the bond holders.

Sabin Willet, an attorney for the lenders, said the secured lenders have offered to sponsor a stock rights offering that would give Visteon the capital it needs without charging any of the fees demanded by the bond holders.

“What everybody wants, there’s no necessity to pay people to take,” said Willet, who accused Visteon of using the fees to buy the support of unsecured creditors for its reorganization plan.

Marc Kieselstein, an attorney for Visteon, argued that the proposed fees are reasonable and necessary to emerge from bankruptcy as soon as possible.

“The debtor has made a business judgment that it is time to get out of Dodge,” Kieselstein said. “No one in their right minds would argue that global auto suppliers should linger in Chapter 11.”