Chassix, a supplier to GM and BMW, files for bankruptcy
DETROIT -- Chassix Holdings Inc., a supplier of chassis, brake and powertrain components to General Motors, BMW, and others, today filed for Chapter 11 bankruptcy reorganization in New York.
The company, owned by billionaire investor Tom Gores’ Platinum Equity LLC, said in a statement it has an agreement with 80 percent of its unsecured bondholders and 71.5 percent of its secured bondholders going into the court proceeding.
“Chassix has been working diligently to address challenges that have impacted the Company’s profitability and cash flows in recent months,” CEO Mark Allan said in a statement.
“The actions we are announcing today represent the culmination of those efforts. The agreement we’ve reached with our bondholders, customers and other parties is intended to strengthen Chassix’s financial condition as we continue to implement operational improvements that will enhance production, improve cash flows and better position us to support the significant demand for our products.”
Chassix has also obtained $250 million of debtor-in-possession financing to navigate bankruptcy, including a $150 million asset-based-loan from PNC Bank and $100 million term loan provided by some of its bondholders.
The bankruptcy petition is believed to be the first filed by a company owned by Gores, a billionaire who also owns the NBA's Detroit Pistons.
Among its larger unsecured creditors are Southfield-based Grede Holdings LLC, owed $3.7 million through two Grede subsidiaries in Minnesota and Wisconsin, and Central Corp., owed just less than $1 million, according to a creditor list submitted with the bankruptcy petition.
Grede and CTR were also among six supplier companies that Chassix sued in Oakland County Circuit Court between Nov. 14 and Dec. 22, after those companies either stopped shipment on parts and materials, threatened to do so or moved to discontinue trade credit and require advance payment on future shipments to Chassix. All of those companies reached settlements out of court with Chassix earlier this year.
Chassix said it expects no interruption in business operations.
“From my clients’ perspective, the less interesting this is, the better,” said Dan Sharkey, partner at Brooks Wilkins Sharkey & Turco PLLC in Birmingham and attorney for several Chassix suppliers listed as creditors in the bankruptcy.
“It’s never a good day when your customer files bankruptcy, but most suppliers have learned from the many bankruptcies 2008-09 that if they continue to be paid on time, they can take this in stride. Until there is a late payment, most suppliers won’t get an itchy trigger finger on stopping shipment.”
The bankruptcy petition covers Chassix Holdings, more than 15 U.S. subsidiaries and one joint venture company.
“Our operations in the United States and around the world are open and conducting business in the ordinary course. Our top priority continues to be providing our customers with the high-quality products and service they have come to expect from Chassix,” Allan said in the statement. “The senior management team and I greatly appreciate the loyalty and support of our employees, whose dedication and hard work are critical to our success and integral to the future of Chassix."
Chassix was born leveraged in April 2013, when Platinum Equity formed it by merging Diversified Machine Inc. and SMW Automotive Inc. Gores acquired Diversified Machine through his equity firm from The Carlyle Group in December 2011. Diversified and SMW together generated $1.2 billion revenue in 2012, and Chassix said today that its annual revenue is about $1.4 billion.
The company expects ongoing revenue and the DIP lending to cover all of its operational and restructuring costs. Some of the bondholders have committed to make an additional $50 million in financing available to the company at emergence from Chapter 11.
Court filings are available online here or by calling (844) 224-1137.
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