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.

Stant Bankruptcy 363 Sale; Have and Have Not Suppliers

The Stant bankruptcy is structured as a 363 Sale to an affiliate of an insider (i.e. a current equity holder).  For suppliers this will be a case of suppler “haves” and supplier “have nots”.  Each supplier should determine its classification as soon as possible.  This bankruptcy likely will move fast – 45 days and the 363 sale will be done.  Based on the limited financial information provided to date, administrative insolvency is a risk.  So for some suppliers who don’t pay attention, this may be a bankruptcy that just keeps on giving.

Stant Corporation – Largest Unsecured Bankruptcy Creditors

Stant Parent Corp, as lead debtor, and its 5 affiliated Debtors (“Debtors”) have requested authority to file a consolidated list of the 20 largest unsecured creditors for itself (the “Top Unsecured Creditor List”) in lieu of a separate list for each of the Debtors. While the trade debt numbers on the Top Unsecured Creditor List are substantial, trade debt claims are small compared to unsecured debt (including preferred stock) and accrued interest and dividend claims.

See the Stant Corporation <a title=”DOCSHEETS™ – BANKRUPTCY CASES” href=”http://www.burbageweddell.com/docsheets-bankruptcy-cases/”>Docsheet™ Report</a> for subsequent <a title=”Stant Corporation Bankruptcy” href=”http://www.burbageweddell.com/docsheets-bankruptcy-cases/stant-docsheet/”>selected docket entries  in the Stant Corporation bankruptcy proceedings</a>.

Stant Corporation Bankruptcy – Debtors and Petitions

See the Stant Corporation Docsheet™ Report for subsequent selected docket entries in the Stant Corporation bankruptcy proceedings.

Stant Corporation and 5 affiliated entities (”Debtors”) filed a petitions in Bankruptcy Court for the District of Delaware for relief under chapter 11 of title 11 of the United States Code.  The Debtors are leading developer and manufacturer of automotive fuel systems, fuel caps, radiator caps and thermostats. The Debtors products are sold in the U.S. and Canada through wholesale automotive parts distribution outlets and to automotive OEMs.

The bankruptcy looks like a classic 363 sale/stalking horse bidder transaction that will result in the clear split of supplier “haves” and supplier “have nots.” A critical vendor motion and attached sample trade agreement show that even for the supplier “haves” there are going to be some tough decisions.