27 Automotive Suppliers File Chapter 11 Bankruptcies in 2009; End of Year Status Summary; Likelihood of Bankruptcy Preference Recovery

Pressures in the global automotive industry forced 27 FN1 automotive parts and component manufacturers and 2 automakers to seek Chapter 11 bankruptcy protection in 2009.  The number of filings is only the headline of the story.  While estimated trade creditor distributions on prepetition claims swung the spectrum of 100% to 0%, estimated recoveries of less than 2 percent predominate.  And more trade creditor pain looms in several bankruptcies, as bankruptcy preference action recoveries are either included in liquidation budgets, are necessary to avoid administrative insolvency or are likely to be sought by plan administrators and liquidation trustees.

This article provides a comprehensive list of the 27 automotive supplier Chapter 11 bankruptcies in 2009, together with status at the end of 2009, estimated trade creditor recoveries and the potential for avoidance actions.

Noble International-Two Debtors not Insolvent?

As discussed in a prior post on the bankruptcy of Noble International Ltd., the parent and 14 subsidiaries have filed for bankruptcy. We have stressed the need to carefully identify your customer.  We wanted to use the Noble International bankruptcy as a case study for point and were surprised to find that two debtors did not appear to be “insolvent” when they filed their Chapter 11 petitions.

Noble International, Ltd. Bankruptcy – Score: Subs In 14 – Subs Out 31

We constantly stress the importance for a bankruptcy creditor to confirm the identity of its client in bankruptcy (see our article “10 Questions a Commercial Bankruptcy Creditor Must Ask and Answer ASAP”). If there was ever a poster child for the need to identify your customer it is the bankruptcy of Noble International, Ltd.