"I've been watching Shiloh for years as an investor," Stewart told Automotive News last week.
Stewart made his play on Aug. 30 when Shiloh — notably, a General Motors and Tesla supplier that has been beaten down by the coronavirus pandemic and was swimming in $575 million in debt — filed for Chapter 11 bankruptcy protection.
He blamed Shiloh's predicament on acquisitions and mergers paid for with debt. The resulting loss of liquidity is a common struggle around the auto parts manufacturing world these days, especially after the pandemic shutdown drained many suppliers of cash reserves.
That's a bad situation for suppliers — but it's an opportunity for Stewart.
"Unfortunately, a lot of people in the industry have done the same thing. And this is what we think is just the beginning of many of these types of transactions that we're going to see over the next six, 18 months."
Only four weeks earlier, Stewart and his investment firm also stepped in to buy control of Dura Automotive, another established U.S. supplier that had worked itself into financial straits.
After evaluating more than 1,000 potential businesses, MiddleGround acquired 75 percent ownership of Dura, the Auburn Hills, Mich.-based supplier of driver control systems, lightweight metal vehicle frames and battery trays, which filed for Chapter 11 bankruptcy in October 2019.
MiddleGround funded the transaction 100 percent with equity, invested more than $60 million in cash to Dura's balance sheet and closed the deal with Dura holding less than $20 million in debt, Stewart said — "unheard of" for a company with $572 million in North American automaker parts sales in 2018, he added.
Stewart, 51, left Toyota in 2007 after 18 years, having started as an hourly line worker in Kentucky.
He joined the New York private equity fund Monomoy Capital Partners as an operating partner that year, became partner in 2016 and then co-founded MiddleGround in 2018. The company is based in Lexington, Ky., where a number of Toyota alumni are involved.