Garrett Motion receives amended proposal from group of investors

By Sarah Lizee

Olympia, Wash., Jan. 6 – Garrett Motion Inc. received a revised proposal from a group of investors, providing for the reorganization and recapitalization of the company as opposed to an asset sale, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The amended proposal would provide for the reorganization of the debtors and the recapitalization of the issuer and would be funded by $1.3 billion of new debt term financing arranged by the debtors at emergence from bankruptcy to New GMI, with a possible increase up to a maximum amount of $1.5 billion, and up to $630 million worth of shares of a new class of series A preferred stock of New GMI, of which $30 million would be in payment of a commitment fee.

The debt term financing and the offering of preferred stock, excluding the preferred stock issued in payment of the commitment fee, may not exceed $2 billion.

Any increase in the debt term financing at emergence above $1.3 billion requires the approval of the debtors and at least 75% of the investors.

The debtors and the investors would negotiate in good faith whether to allow up to $100 million raised by the debt financing and/or the offering of series A preferred stock to be used on the effective date of the Chapter 11 plan in connection with the satisfaction of the Honeywell spinoff claims in lieu of all or part of the series B preferred stock that would otherwise be used for that purpose.

The capital stock of New GMI would consist of

• Reinstated shares of common stock;

• Up to $600 million and no less than $400 million of series A preferred stock issued to holders of existing shares of common stock under a rights offering, in exchange for cash compensation, which rights offering would be fully backstopped by the investors. The investors are entitled to a direct allocation of $140 million in series A preferred stock even if the size of the rights offering is less than $600 million;

• $30 million of series A preferred stock issued to the investors as a commitment fee;

• Warrants issued to the holders of existing shares of common stock for 6% of the common stock, with a four-year term and a strike price equal to 175% of the equity value under the confirmed bankruptcy plan; and

• If applicable, common stock or shares of a new class of series B preferred stock, with an annual dividend rate of 9% or less, or an annual dividend rate as otherwise approved by at least 75% of the investors, to be issued to holders of Honeywell spinoff claims if included in the Chapter 11 plan that is ultimately confirmed by the bankruptcy court.

The amended proposal remains subject to negotiation and an order from the bankruptcy court, among other things.

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 in the U.S. Bankruptcy Court for the Southern District of New York under case number 20-12212.

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