Insolvency looms if Kiekert’s acrimonious restructuring fails; otherwise Morgan Stanley and Bluebay are expected to receive a combined majority stake.
The German supplier of locking systems to the automotive industry, owned by the buyout firm Permira, is likely to get new owners or be declared insolvent, according to an insider.
Permira has agreed that debt facilities held by a consortium could be swapped for equity. Senior creditors Morgan Stanley and Bluebay could expect to be offered a debt-for-equity swap in return for a combined stake of almost 60% in Kiekert, whose mezzanine debt holders, including Deutsche Bank, Silver Point, Orn and Trafalgar, would be expected to get just over 40%.
Permira stands to lose its entire equity stake, which is understood to amount to 75%. It seems that Permira had no alternative to agreeing to the deal, as Kiekert was in breach of its covenants.
The source explained that Kiekert lost 40% of its revenues when US-based car manufacturer Ford dramatically reduced its orders.
Ford’s cost-cutting programmes were reported to have hit other suppliers as well. Industry observers believe that Visteon, Delphi, Johnson Controls and Tower Automotive are also facing difficulties.
At the same time, it could be argued that strained relations between Kiekert and Ford might not have helped Kiekert’s plight: In 1998, Kiekert suspended deliveries to Ford’s factory for three days, citing technical difficulties, but observers suspected that it was flexing its muscles to persuade Ford to offer better conditions.
Earlier in 2006, Permira had appointed the investment bank Drueker & Co to sell its stake in Kiekert, but did not receive any adequate bids. In 2000, Permira (formerly known as Schroder Ventures) had acquired a majority stake in Kiekert after completing a tender offer taking the total value of the acquisition to US$428m.
Industry experts believe that once the debt issue is under control, potential trade buyers that might be interested in bidding for Kiekert include Germany’s KruppThyssen Automotive and German car door manufacturer Brose Fahrzeugteile, as well as the US automotive suppliers Johnson Controls and Magna International.