Marelli selects KKR to lead debt restructuring

Auto parts supplier Marelli, which is seeking to renegotiate debt, has chosen current owner KKR & Co. as its investor to revamp its business, according to foreign media reports.

The decision was confirmed by company spokesman Hiroshi Watanabe after Marelli held a meeting with creditors on May 31.Marelli later issued a statement saying that the company's debt restructuring committee believes that KKR's bid is best suited to help Marelli restructure its financial position and revive its business.

As part of a restructuring plan, Marelli is seeking to cancel about 450 billion yen ($3.5 billion) of debt from about 1.13 trillion yen in obligations, according to people familiar with the matter.Some of the debt will be converted into equity, the people said.

A major supplier to automakers such as Nissan and Stellantis, Marelli applied for ADR procedures in Japan in March, which allow financially strained companies to renegotiate debt with creditors while continuing to operate.In the ADR process, negotiations between a company and its creditors are conducted by a panel of independent mediators with legal and accounting expertise, selected by the Japanese Association of Turnaround Professionals and appointed by the Ministry of Economy.

In 2019, KKR bought Marelli from Fiat Chrysler and merged it with its existing portfolio company, Calsonic Kansei.In Marelli's ADR process, KKR defeated a joint bid from Bain Capital and Apollo Global Management."We are delighted that the ADR mediator and Marelli will continue to select KKR," KKR said in a statement, adding that the company would "continue to support Marelli as a leader in the automotive industry in the future."

According to people familiar with the matter, KKR will write down its holdings of about 200 billion yen in Marelli and increase its capital by 650 million US dollars to obtain new shares through third-party placement.

Marelli aims to seek approval from Mizuho Financial Group Inc. and other lenders at a meeting of creditors to complete the ADR process.The ADR proposal will then be approved at a formal meeting between Marelli and its lenders scheduled for June.

"Throughout this process, we remain committed to working closely with lenders to achieve success," Marelli said in the statement.

Image credit: Marelli

Marelli's revenue fell sharply last year as the coronavirus pandemic disrupted global supply chains, chip supplies and auto manufacturing.With around 54,000 employees worldwide, Marelli operates around 170 factories that produce lighting systems, air conditioners, motors, suspensions and other components for automakers around the world.

In Automotive News' 2021 Top 100 Auto Parts Suppliers list, Marelli ranks 18th, with sales of its automotive business of $11.57 billion in 2020.