The news that Japan’s Marelli Holdings, a key supplier of auto parts to giants such as Nissan and Stellantis, has filed for Chapter 11 protection in the US is causing global concern, marking another dramatic episode in the turmoil sweeping the global auto industry. With debts that once exceeded $7.6 billion, Marelli is now attempting a radical restructuring and change of ownership, with 80% of its creditors supporting the deal.
With the $1.1 billion bridge financing secured by its lenders, 80% of which have already supported the restructuring, Marelli aims to deleverage and strengthen its liquidity. The company said the process is not expected to disrupt current operations.
The End for KKR
Victor Khosla’s Strategic Value Partners is expected to take control, while KKR, which created Marelli in 2019, will hand over its shares. Despite assurances that the process will not affect its operations, Marelli’s bankruptcy sends a strong message about the pressures on suppliers in the era of electrification and low demand.
Causes of the crisis
Marelli was created after the merger of Magneti Marelli and Calsonic Kansei in 2019 with significant bank borrowing for the acquisition by KKR. Despite restructuring efforts, reduced demand from large automotive customers (e.g. Nissan, Stellantis) has exacerbated the company’s financial pressure, mainly with the automotive industry’s shift towards electrification and automation.
Global Concern
With more than 50,000 employees and a presence in 170 locations worldwide, the group’s collapse is causing global concern in the industry. The Saitama, Japan-based manufacturer has about 170 facilities worldwide that supply lighting, air conditioning, electric motors, suspensions and other components to automakers.
In addition to SVP, Marelli’s creditors include Deutsche Bank, Mizuho Financial Group and other lenders. The consortium also includes Seoul-based MBK Partners Ltd. and Fortress Investment Group LLC of New York.
