The Japanese automotive supplier Marelli has filed for Chapter 11 bankruptcy protection in the USA to restructure financially amid massive liquidity problems. The move follows months of disputes with lenders and investors over the future of the company, which recently struggled with a debt burden of over 7.6 billion US dollars.
The main creditor is a consortium led by the hedge fund Strategic Value Partners (SVP), which is keeping Marelli afloat with $1.1 billion in debtor-in-possession financing. The group intends to fully take over the company as part of the proceedings if no higher offer is made within a 45-day period.
The insolvency brings one of Japan's most complex private equity deals to a turning point: In 2019, KKR orchestrated the merger of Calsonic Kansei with Italy's Magneti Marelli, using approximately 700 billion yen in debt financing. However, the demand collapse triggered by Covid-19, coupled with issues at major customers like Nissan and Stellantis, caused revenues to plummet. A restructuring carried out in 2022 provided only short-term relief.
The entry of distressed-debt investors like Fortress and MBK Partners and the shift of the conflict to US courts are considered unprecedented among bankers in Tokyo. For KKR, not only capital but also reputation is at stake. The financial investor had already written off around 2 billion US dollars and injected 650 million US dollars in the first restructuring round.
While SVP repeatedly improved its offer, the Indian supplier Motherson also submitted a binding takeover bid in May – supported by automotive companies that see Marelli as a strategic partner. Internal documents available to the Financial Times prove their interest. A final decision on the change of ownership is still pending.
The situation is particularly sensitive for the Japanese credit institutions, especially Mizuho, which, in addition to its role as a Marelli creditor, is also significantly involved with Nissan. A sale to purely financial investors was considered politically sensitive – but the pressure from the capital markets has recently grown faster than the time window for an industrial solution.
