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. The company and certain of its subsidiaries successfully emerged from bankruptcy on April 30.
 
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:

• All creditors were paid in full, other than financial creditors who agreed to take negotiated haircuts. 
• The problematic indemnity was completely eliminated and all litigation with Honeywell was settled. 
• Public stockholders received the option of a $6.25 cash recovery or the right to retain their stock and invest in the new company at the same valuation as the plan sponsors. 
• Every class of impaired creditors and holders of over 99 percent of the prepetition common stock approved the plan of reorganization. 
• The company's new common stock commenced trading on Nasdaq on May 3.