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Progress for GST AutoLeather

Automotive leather group GST AutoLeather, which filed for Chapter 11 bankruptcy protection in October 2017, is close to a new ownership structure following a series of court cases at the start of 2018.

At the most recent hearing on February 12, a judge in Delaware approved a bid for GST AutoLeather from a group of companies that had supplied the leather manufacturer with secured loans. This deal looks likely to close before the end of March.

Secured lenders submitted a bid worth $166.9 million, including the cancellation of some of the debts owed to them by GST AutoLeather and the assumption of several million in other debts, in addition to just under $100 million in cash.

An executive working on the automotive leather supplier’s restructuring, Jonathan Hickman, told the court that GST AutoLeather will be able to complete its restructuring plan with $94.1 million.

Automotive seating company Faurecia submitted a bid for $163.9 million and the judge has designated it as “back-up buyer” should the winning bid fall through.

A lawyer representing the Royal Bank of Canada, which is the agent for the secured lenders, said after the February 12 hearing that GST AutoLeather is “in a much better place today than at the beginning, or even a week ago”.

Industry commentators continue to raise questions about the ongoing viability of GST AutoLeather’s business.

Important suppliers of raw materials, leather chemicals and so on are among the unsecured creditors in this deal. There is speculation that, should they lose out in the restructuring, they will seek to claw cash back in future negotiations with GST. This, in turn, would make it more expensive for GST to produce its leather and make it more difficult for the company to trade its way towards a healthier financial footing.

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