In its third “mega case” as lead debtors counsel since the start of 2020, Sullivan & Cromwell helped Garrett Motion design and complete what is being regarded as one of the most innovative Chapter 11 cases of the year.
Prior to filing, Garrett Motion had a great operating business hobbled by an impossible capital structure. The company, created by a spin-off in 2018, had inherited too much leverage and an unusual $5 billion, 30-year indemnification obligation to Honeywell International that Garrett Motion could neither repay nor terminate. This broken balance sheet prevented the company from raising new capital or participating in strategic transactions in its industry.
The Garrett Motion team designed a Chapter 11 case organized around the forced termination of the indemnity and the refinancing of the company as part of a competitive auction process. Hotly contested by bidders and creditors in the first months of the case, the competitive process in Chapter 11 ultimately unlocked very significant enterprise value. At the end of the case:
The Garrett Motion case was noteworthy in that the company filed for Chapter 11 on a timetable that was not driven by a debt maturity or other specific event. Instead, the filing was timed so that the company was in the strongest possible operating and cash flow position, and therefore able to achieve the best negotiated result with stakeholders. The Chapter 11 case was also significant as a rare filing for Chapter 11 of an industrial company with its headquarters and bulk of operations outside of the United States, as well as the first Chapter 11 filing of a large Swiss operating subsidiary.
In 2020, S&C also represented LSC Communications and California Resources Corporation on their successful Chapter 11 reorganizations. Learn more about S&C’s debtor practice here.
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