Auto part maker Transtar files for bankruptcy with ¡®prepackaged¡¯ plan

Aluminium and steel auto parts maker Transtar Holding Co. filed for bankruptcy Sunday after reaching a deal with its senior lenders to swap their debt for ownership of the company.

The company filed for chapter 11 protection in U.S. Bankruptcy Court in New York with a “prepackaged” chapter 11 plan after garnering support from its creditors to support the restructuring proposal. Such preapproved plans are becoming increasingly popular with companies and investors, who want to minimize the time and expense of chapter 11 balance sheet restructuring.

The plan calls for the senior lenders, led by Silver Point Capital, to swap about $425 million in debt for 100% of the equity in the reorganized company.

Joseph Santangelo, Transtar’s chief financial officer, blamed the company’s chapter 11 filing on the “higher than anticipated difficulty” of integrating its newly-acquired ETX’s business, an aftermarket transmission parts maker, into the company.

Transtar’s pretax earning are down 22% on a year-over-year basis, Mr. Santangelo said in court papers, and revenue is off 2.8% for the end of the first quarter of 2016.

The company had estimated revenue last year of $643.7 million, according to data provided by FactSet.

A Silver Point lending affiliate is providing Transtar with up to $69.7 million in bankruptcy financing in order for the company to continue operating during the chapter 11 case.

The drivetrain parts maker, based in Walton Hills, Ohio, is backed by San Francisco private-equity firm Friedman Fleischer & Lowe. The company’s existing equity will be wiped out under the plan.

Transtar, which employs about 2,000 people, was founded by Monte Ahuja in 1975. The company’s transmission and drivetrain products are marketed through various brands including Transtar, RECON, DACCO, Axiom Automotive Technologies, King-O-Matic, Pro-King and Nickels Performance.

The law firm Willkie Farr & Gallagher is handling the chapter 11 case. The case number is 16-13245.

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