Bankrupt auto supplier Venture Holdings Co. LLC last week lost a $150 million contract to supply Hyundai Motor Co.'s new Alabama plant. Venture's secured creditors would not approve the deal, according to Venture's lawyer.
Venture's unsecured creditors said the move jeopardizes the health of the Fraser, Mich.-based injection molder.
Secured lenders feel Venture needs to concentrate on stabilizing senior management and work with its current customers. The deal, which Venture had tried to salvage since filing its Chapter 11 petition March 28, cannot happen without secured lender consent, said Venture lawyer Salvatore Barbatano, a partner at Foley & Lardner in Detroit.
``They wanted us to focus on other things,'' Barbatano said at a Dec. 11 hearing in U.S. Bankruptcy Court in Detroit. ``[The secured lenders] raised serious concerns. They felt there were ongoing negotiations with our largest customer, they want senior management stabilized and that should be the priority.''
Venture had found a joint-venture partner, private equity firm Yucaipa Cos., that was willing to put up $14 million and help finance an additional $80 million to help complete the Hyundai contract. But Venture had to come up with $8 million on its own, and secured lenders and the banks providing debtor-in-possession financing were not willing to do that.
The company had pressed hard to get the deal done since August, when Hyundai asked U.S. Bankruptcy Judge Thomas Tucker for permission to break the contract and find another supplier.
The Venture plant, in Prattville, Ala., was to employ 600. It's the kind of deal unsecured creditors say Venture needs to emerge from bankruptcy as a strong company. The largest unsecured creditors, bondholders owed $455 million, likely will receive equity in a reorganized Venture, according to the company's reorganization plan.
``Yes, it would have required significant effort on the part of management,'' said Fred Hodara, a partner at New York-based Akin Gump Strauss Feld LLP and lawyer for the bondholders. ``Their attitude was that the company shouldn't be distracted, a company that for any long-term viability has to be working these types of contracts. We want to express our severe disappointment in how the senior lenders, at the end of the day, prevented this to occur.''
Barbatano said the company also is frustrated it could not get the deal done. But he said the senior lenders' concerns were legitimate.
Venture, owned by Chairman Larry Winget, has struggled to keep management continuity since filing for bankruptcy. The company initially hired former Freudenberg-NOK GP Chief Executive Officer Joseph Day as its interim CEO, but he resigned after two months. Executive Vice President James Butler recently left the company in an ``amicable parting,'' Barbatano said.
Barbatano said the company will ask Tucker to approve a contract with Horst Geldmacher to be CEO. Geldmacher was in charge of Venture's European operations.
Venture employs 1,890 in metro Detroit and 12,000 worldwide. Ken Anderson will become chief financial officer.
Debtor-in-possession lenders are concerned enough about stabilizing senior management that they made approval of Geldmacher's contract to be CEO a condition of continued financing.
Without that financing, Venture would face a liquidity problem, Barbatano said. The company needs to make investments for work from its current customers at a time when the industry shuts down for about two weeks during the Christmas and New Year's holidays.
Customers have set a Dec. 19 deadline on whether Venture can meet those commitments. Venture, which manufactures interior trim and bumper fascias, is a critical supplier to for General Motors Corp. and DaimlerChrysler AG.
Asked by Tucker what would happen if Venture did not get the additional debtor-in-possession financing by the end of the year, Barbatano said, ``The liquidity problem becomes worse ... financial pressure will continue, and the business base will continue to erode. We won't have the liquidity to meet the commitments [Venture's] customers would like to see.''
A hearing on the financing is scheduled for Dec. 18.
Losing the Hyundai contract calls into question a 66-unit injection press order for Venture from the HPM Division of Taylor's Industrial Services LLC. On Dec. 5, before the bankruptcy court hearing, HPM President and CEO Christopher Filos said his company already has delivered 14 presses to Venture, and will make the others over the next three years. Filos could not be reached for comment.