Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Bankruptcy StrategistLJN NewslettersNewsSections

A New Model for Auto Supplier DIP Financing?

By Stuart A. Laven, Jr.
November 29, 2005

Without any reservation, it is safe to say that insolvency crisis facing the U.S. auto industry ' from myriad Tier 2 suppliers right up to the legacy-burdened OEMs ' has become the cause c'l'bre of the professional restructuring community, and for objectively good reason. In this year alone, at least eight parts makers (among them, Collins & Aikman Corp., Meridian Automotive Systems, Inc., Tower Automotive, Inc., Jernberg Industries, Inc., Harvard Industries, Inc., Jacobs Industries, Inc., and Delphi Corp.) filed for Chapter 11 relief. And many industry experts believe that these cases represent merely a harbinger of even bigger things to come. See, eg, Whiteman L: GM Could Seize the Opportunity. TheDeal.com (Oct. 10, 2005) (reporting that Bank of America Securities LLC analyst Ronald Tadross raised the odds of a GM bankruptcy from 10% to 30% following Delphi's Chapter 11 filing); Benson MD, Houdek TA: Automotive OEM and Tier 1 Consolidation ' Tip of the Iceberg. (Stout Risius Ross, Inc. Client Advisory) (2005); Houlihan, Lokey, Howard & Zukin, Inc.: Automotive Supplier Quarterly Update at 1 (Second Quarter 2005).

As more and more of the industry's Tier 1 and 2 players progress towards or work through major restructurings, the availability of financing for ongoing operations has become a critical concern, especially in the face of high materials costs and unusually burdensome OEM traditions (like requiring suppliers to bear crushing tooling and other ramp-up capital expenditures for months or even years in advance of new product launches). Within these parameters, bank financing is not always a given.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

A Lawyer's System for Active Reading Image

Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.

Protecting Innovation in the Cyber World from Patent Trolls Image

With trillions of dollars to keep watch over, the last thing we need is the distraction of costly litigation brought on by patent assertion entities (PAEs or "patent trolls"), companies that don't make any products but instead seek royalties by asserting their patents against those who do make products.