Lear Corp Filling Chapter Eleven Bankruptcy

July 3, 2009

In a report originally filed by the New York Post on June 25, it looks like the Lear Corporation is preparing to file for Chapter Eleven bankruptcy.

This has debt holders in the U.S. auto parts manufacturer skittish but attempting to get ready for the impact of the upcoming proceedings.

The Southfield, Michigan-based company has already been in breach of debt agreements with some of its largest lenders. With waiver Lear received set to expire at the end of June, the company is readying itself for the next phase in its plan to restructure under bankruptcy regulations.

This news comes three months after Lear first warned that it might be forced to file for bankruptcy back in March. The company had been investigating different alternatives for restructuring its debt outside of the courtroom. According to one source, Lear would not be able to make a successful restructure with the American auto industry still shaken by industry wide losses.

Lear was a prominent parts manufacturer that specialized in the production of electrical equipment and seating for automobiles. The source of the trouble came about when Ford was forced to cut back its production orders and General Motors went belly up.

As recently as last week, Barclays reduced its rating on Lear shares from “equal weight” to “underweight.” This move was prompted by the belief that shareholders were less likely to receive much value for their investments regardless of whether Lear managed a restructure outside court or via formal bankruptcy hearings.

Many details remain under wraps, as Lear has chosen to remain silent on its internal affairs. There are bound to be updates with more salient information as the company proceeds with its declaration of bankruptcy in the coming weeks.