Home » Collins & Aikman Files for Chapter 11 Reorganization
Collins & Aikman Files for Chapter 11 Reorganization
May 23, 2005
Automotive supplier Collins & Aikman Corporation,Troy, MI, said that it and substantially all of its domestic subsidiaries have filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Michigan. The company said the Chapter 11 filing was precipitated by mounting liquidity issues and the need for immediate cash to fund operations. In conjunction with the filing, the company has received a commitment from JPMorgan Chase for up to $300 million in debtor-in-possession (DIP) financing, with an interim approval request of $150 million. Upon Court approval, the DIP financing, combined with the company's cash from operations, is expected to provide sufficient liquidity to meet post-petition operating expenses, including supplier obligations and employee wages, salaries and benefits. The company's worldwide operations are expected to continue in the normal course of business without interruption. Collins & Aikman said that it intends to use the Chapter 11 process to de-leverage its balance sheet and restore profitability. Charles Becker, acting chief executive officer of Collins & Aikman said, We believe that this is the best course of action for our customers, employees, suppliers and other business partners. The protections afforded by the Chapter 11 process allow Collins & Aikman to gain immediate liquidity, continue operations in the ordinary course and focus on maximizing the value of the business. We expect to work diligently during the coming months to develop a restructuring plan that will allow the company to emerge from Chapter 11 as a stronger, more competitive company that is well positioned for long-term success." None of the company's affiliates outside of the U.S. were included in the filing. JPMorgan Chase has also agreed to provide funding under the DIP facility to support Collins & Aikman's non-U.S. operations, which is expected to provide the non-U.S. affiliates with sufficient liquidity going forward. Mr. Becker emphasized that the Company expects day-to-day operations to continue as usual during the Chapter 11 process. "We do not anticipate that customers and suppliers will experience a change in the way we do business with them," Mr. Becker said. "We have taken steps to make sure that suppliers get paid in full in the ordinary course of business for all goods and services provided after the filing date, and that customers continue to receive the same quality products to which they are accustomed." As a routine matter, Collins & Aikman is presenting its ongoing employee compensation and benefit programs to the Court for approval as part of the company's "first day" motions. The company anticipates that the Court will approve these requests, thereby ensuring that employees will be paid and that qualified benefit programs will continue without interruption or delay. "We greatly appreciate the ongoing support of the company's customers, employees and suppliers," Becker said. "Their loyalty is critical to Collins & Aikman's success and integral to the future of the company. The management team is committed to making this reorganization successful and leading Collins & Aikman towards a bright future. Employees, customers, suppliers and other business partners can look forward to a company that can grow and compete successfully." Additional information regarding the Chapter 11 reorganization is available on the Company's website, www.collinsaikman.com, or by calling the Company's toll fee Reorganization Information Line at 1-866-795-7641 or for international callers +1 310-432-4170. Collins & Aikman Corporation, a Fortune 500 company, is a global manufacturer of cockpit modules and automotive floor and acoustic systems and is a supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. It has more than three dozen manufacturing facilities in the U.S. and Canada.