Takata bidders favour Japan bankruptcy move

Bloomberg

Bidders for troubled air-bag maker Takata Corp. are leaning toward a court-mediated bankruptcy in Japan to shield them from liabilities, a move that the company had opposed on concern it would disrupt the supply of replacement parts, according to people familiar with the matter.
Takata, which is seeking a sponsor after triggering the biggest safety recall in automotive history, may name the buyer in February or March, according to the people, who asked not to be identified as the discussions are private. Takata is still in discussions about its turnaround plan and no decision has been made on bankruptcy proceedings, the company said in response to a stock exchange query.
Shares of the air-bag maker tumbled 17 percent to 717 yen at the close of trading on Thursday, after being suspended for the morning session. The stock has swung by close to the daily limit on six days in the past three weeks as investors speculated on the company’s progress in securing a financial backer and settlement.
Takata faces a recall that is expected to cover more than 100 million air bags. The company’s faulty products have been linked to at least 17 deaths worldwide. Due diligence by bidders including Autoliv Inc. and Key Safety Systems Inc. had to be extended in part because of the difficulty in calculating the potential liabilities, people with knowledge of the talks said last month.
The eventual acquirer would have to ensure a stable supply of replacement parts even as uncertainties surround its exposure to future liabilities, including the costs for replacing the air bags.
The company last week admitted to hiding the deadly risks of its air bags for about 15 years and agreed to plead guilty in the US to one criminal charge as part of a $1 billion settlement, according to court papers. Three former Takata executives were separately indicted for their alleged roles in the cover-up. The $1 billion it agreed to pay in the US settlement includes $25 million to the authorities and $975 million to compensate carmakers and people who were injured, according to court papers. While the criminal fine is due within a month, the company doesn’t have to pay the restitution until it’s sold because it can’t afford to pay now.
US buyout firm Bain Capital may join Key Safety Systems’s bid for Takata as a minority partner, while Japanese inflator maker Daicel Corp. may also participate in the consortium though it won’t take an equity stake, people familiar with the matter said. Bain Capital and Daicel had earlier put in a joint bid for Takata and later dropped out as carmakers favored first-tier suppliers such as Autoliv and Key Safety, people familiar have said. Representatives for Key Safety Systems, Bain Capital and Daicel declined to comment, while Autoliv couldn’t immediately be reached for comment.
Takata Chief Financial Officer Yoichiro Nomura said in November a court-mandated restructuring could disrupt the supply of parts to automakers, while a court-led bankruptcy will make it easier for Takata’s financial adviser Lazard Ltd. to find a buyer for the air-bag maker. Some bidders were considering the possibility of some form of bankruptcy proceedings for Takata to mitigate the liabilities, people familiar said in September.
Takata has 571 suppliers in Japan, which employ 59,669 people nationwide, and about a third of these companies have annual revenue not exceeding 10 billion yen, according to researcher Teikoku Databank Ltd. Carmakers have previously raised concerns suppliers to Takata may withhold shipments on concern that a bankrupt Takata won’t be able to make payment, leading to a disruption in the production of replacement air bags.