Lear files Chapter 11

Pressured by the bankruptcies of key customers General Motors (GMGMQ) and Ford Motor Co. (F) as well as heavy debts, Lear Corporation (LEA), one of the largest automotive parts manufacturers in the world filed for Chapter 11 bankruptcy protection on July 7, 2009.

Lear was in talks with the lenders and bondholders to convert $3.6 billion of debt into a combination of new debt, convertible stock and equity warrants. On July 1, 2005, Lear had reached an agreement regarding a consensual debt restructuring with the lenders and bondholders but was also seeking additional support for the restructuring plan.

The company received commitments for $500 million as debtor in possession (DIP) financing from a group of lenders led by J.P. Morgan (JPM) and Citigroup (C).

In March 2009, Lear had warned to file Chapter 11 bankruptcy when its major customers started going bankrupt. The company suffered from the bankruptcy of automakers particularly, General Motor and Ford, its key customers. GM and Ford together accounted for 40% of its Lear's sales.

According to Associated Press, Lear has reported total assets of about $1.27 billion and total liabilities of about $4.54 billion. The company defaulted on a $38 million interest payment that serviced its 8.5% senior notes due 2013 and its 8.75% senior notes due 2016. A 30-day grace period on the payment expired on July 1, 2009.

Lear stated that the Chapter 11 filings do not affect its subsidiaries outside the United States and Canada.