American Axle & Manufacturing Holdings Inc., scrambling to restructure without Chapter 11 reorganization, has reached tentative agreement with General Motors Co. on a rescue plan.
The deal, which is contingent on American Axle's ability to amend its credit agreements, would provide the supplier:
Quick payment for parts delivered to GM.
A $110 million infusion of GM cash.
A $100 million line of credit from GM.
In return, GM would get the rights to buy up to 7.5 percent of American Axle's common shares over five years. GM could purchase an additional 12.5 percent of American Axle shares, depending on how much American Axle draws on the $100 million line of credit.
The deal was struck on Monday and disclosed this morning in a filing with the Securities and Exchange Commission.
The filling said American Axle's lenders had extended the supplier's credit line covenants to Aug. 29. They had been scheduled to expire on Thursday. During the extension period, American Axle must maintain at least $75 million per day in liquidity for the extension to remain active.
American Axle shares more than doubled to $5.70 today on the news.
The deal marks the second time GM has stepped in to help its former axle manufacturing division, which was spun off in 1994 and now relies on GM for more than 75 percent of its revenue.
Last year GM agreed to give the supplier $175 million through the first quarter of 2009 to help fund buyouts of UAW workers at American Axle's U.S. plants.
The supplier, hurt by plunging vehicle production, has been working for months to avoid bankruptcy and restructure $1.3 billion in debt.
The $110 million payment from GM would offset American Axle's costs for contracts with units that GM shed in its recent reorganization. The funds also would supplement terms of existing GM contracts and would help American Axle align capacity with lower demand anticipated from the new, smaller GM.
Also, American Axle would have the option of being paid in 10 days for parts delivered to GM through 2013 -- much faster than the 45 days typical in the industry. In return, GM would receive a 1 percent discount on those deliveries if the option is used.