Visteon ad hoc equity committee says plan 'must' be revised

New York, March 25 - An ad hoc committee of holders of Visteon Corp. equity told the company its most recent Chapter 11 reorganization plan "completely ignores the true value of the company", "wrongfully extinguishes shareholders" - and "must be revised."

In a letter to Visteon written by Dewey & LeBoeuf LLP, which is representing the equityholders, they committee noted that under Delaware corporate law a shareholder vote is required to sell substantially all Visteon's assets.

However the committee claims the company is trying to achieve the same result through a transfer of virtually all of Visteon's assets to certain creditors without a shareholder vote.

The latest plan, filed March 15, is "based on an unrealistically low valuation of the company and its assets and a suboptimal capital structure, which together provide an indefensible windfall to the company's secured lenders at the expense of the company's other creditors and shareholders," according to the committee.

It said its own analysis shows the company is worth "significantly more" than Visteon's own projections, which, it says, "must be viewed with a healthy dose of skepticism" and fail to take into account the improving macroeconomic picture and consensus assumptions for worldwide production volume growth in the auto industry.

In addition, the operational improvements achieved by Visteon are not reflected in the plan, the committee believes.

The plan values equity in non-consolidated joint ventures at far below their fair market value.

The committee said it was "eager" to learn more about the company's "motivations and processes by which it arrived at its valuations and reserves all rights to seek discovery on this issue and all issues."

In addition, it suggested there may be better capital structures which would "preserve, create, and distribute value more fairly to all of the company's stakeholders.

"Any such structure should reinstate the existing bank debt or provide the bank debtholders with a new note at the lowest interest rate the law allows, and we urge the company to do so."

The equityholders believe the company can generate enough cash to pay interest and make pension contributions, while still leaving enough to address future debt maturities.

"Therefore, the notion that Visteon must be free of long-term debt is an unreasonable view that directly robs equityholders of value resulting from the preservation of the company's bank debt at an attractive interest rate," the committee said.

It suggested distributing shares of Halla to its guaranteed note holders.

In addition, it believes the remaining unsecured bonds should be satisfied with a combination of cash and convertible preferred securities. Cash could come from either excess balance sheet cash, or a $200 million rights offering.

The committee said it is reserving its rights to seek termination of exclusivity to propose a plan and seek the appointment of an examiner to protect its interests.

It noted that appointment of an examiner may be "particularly appropriate given the wide gulf between the company's prior projections and actual results, the limited changes made in the plan, and the issues the company's plan raises as to whether the company and its board are carrying out their fiduciary duties."

Visteon, a Van Buren Township, Mich., global automotive supplier, filed for bankruptcy on May 28, 2009. Its Chapter 11 case number is 09-11786.

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