Auto seating supplier Lear Corp said on Wednesday it would file for Chapter 11 bankruptcy protection in a reorganization supported by key secured lenders and bondholders and that it had obtained $500 million in bankruptcy financing.
Lear, which had been in talks with its lenders since late June, said in a statement that its board of directors had approved a bankruptcy filing as the fastest and most effective way to reduce its debt in the face of slumping global auto demand.
The Southfield, Michigan-based company said its restructuring plan had the support of most of the members of a committee representing its secured lenders and another group representing its bondholders.
Lear said its operations outside the United States and Canada would not be affected by the bankruptcy filing.
Lear had sales of $13.6 billion in 2008. Almost 80 percent of its sales were from auto seats supplied to customers such as General Motors Corp and Ford Motor Co .
The company had warned in March that it might have to file for bankruptcy protection after breaching debt covenants at the end of last year and borrowing all of the $1.2 billion in its main credit facility.
A waiver from lenders on its loan defaults expired on June 30. Lear was also near the end of a 30-day grace period on a $38 million bond interest payment it missed on June 1.
The Obama administration, which made $5 billion available to guarantee receivables GM and Chrysler owed suppliers earlier this year, last month rejected a request by suppliers for up to $10 billion in additional loans.
Suppliers and restructuring advisers have said the lack of new financial assistance would result in a wave of bankruptcies because many auto parts suppliers lack capital to ramp up production to meet expected demand in the current quarter.
(Reporting by Kevin Krolicki; Editing by Toni Reinhold)