Visteon term agent says toggle plan too costly, pushes alternatives

By Caroline Salls

Pittsburgh, May 18 - Visteon Corp. pre-bankruptcy term lender agent Wilmington Trust FSB objected to the company's proposed plan support, equity commitment and cash recovery backstop agreements connected to the "toggle" plan of reorganization filed on May 7, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Visteon's proposed plan includes a rights offering option and a claims conversion option.

However, Wilmington said the toggle plan is "an ill-conceived structure."

"It contains no enforceable commitment either to fund or toggle, providing instead to the bondholders a one-way option (exercisable over an indefinite time period) to invest in the debtors at the sole expense of their estates," the agent said in the objection.

In addition, Wilmington said the toggle plan agreements would saddle Visteon with more than $100 million of administrative expenses, including new fees payable to lawyers, investment bankers and bondholder investors.

The agent said the term loan lenders have provided two alternative approaches that would result in equal or better economic return to creditors without the administrative expense or structural uncertainty related to the toggle plan.

According to the objection, the lenders' second proposal, made after the toggle plan was filed, would eliminate investor fees and funding risk, reduce the amount of exit financing required under the toggle plan and raise the guaranteed distribution for bondholders to 15% of the reorganized company's equity.

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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