Garrett shareholders propose reorganization plan instead of KPS sale

By Sarah Lizee

Olympia, Wash., Oct. 23 – A group of Garrett Motion Inc. shareholders is disputing the company’s proposed sale of its business to KPS Capital Partners, LP for $2.6 billion and is proposing a competing Chapter 11 plan of reorganization, according to documents filed on Friday in the U.S. Bankruptcy Court for the Southern District of New York.

The plan has the support of sponsors Centerbridge Partners, LP and Oaktree Capital Management, LP, who collectively hold about 15% of the debtors’ senior notes and over 9% of its common equity, as well as holders of about 40% of the debtors’ common equity and some senior notes, and former parent Honeywell International Inc.

The plan sponsors’ updated plan proposal includes a bid value of $3.2 billion, with Honeywell claims fully resolved, and secured debt claims being repaid in cash with the interest waived.

Senior notes claims would be repaid in cash and settled, and general unsecured claims would be repaid in full or assumed.

Holders of equity interests would have their interests reinstated, participate in upside and, assuming no break-up fee or expense reimbursement are paid to KPS, receive part of an $84 million cash distribution.

The plan sees Garrett emerging from bankruptcy in early 2021.

Centerbridge and Oaktree say their plan provides for enhanced recovery for existing equity compared to the KPS purchase, and that even if the Honeywell claims were completely extinguished under the KPS purchase, existing equity recovery would still be greater under their plan.

Rolle, Switzerland-based Garrett Motion is a provider of passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions. The company filed for Chapter 11 bankruptcy on Sept. 20 under case number 20-12212.

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