| Item 1.01 | Entry into Material Definitive Agreement |
As previously reported, on September 20, 2020, Garrett Motion Inc. (the “Company”) and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors’ Chapter 11 cases (the “Chapter 11 Cases”) are being jointly administered under the caption “In re Garrett Motion Inc., 20-12212.” As previously reported, in connection with the Chapter 11 Cases, on January 11, 2021, the Company entered into a Plan Support Agreement (the “Plan Support Agreement”) with affiliated funds of Centerbridge Partners, L.P. (“Centerbridge”), affiliated funds of Oaktree Capital Management, L.P. (“Oaktree”), Honeywell International Inc. and certain other investors and parties (the “CO Group”) regarding restructuring transactions (the “Restructuring Transactions”) pursuant to a Chapter 11 plan of reorganization (the “Approved Plan”) on the terms and conditions set forth in the Plan Support Agreement. The Plan Support Agreement provides, inter alia, that the Company will conduct a rights offering of convertible Series A preferred stock of the Company (the “Series A Preferred Stock”) for a maximum aggregate value of $200 million to existing holders of the Company’s common stock (the “Rights Offering”), backstopped by Centerbridge, Oaktree, Attestor Value Master Fund LP, The Baupost Group, L.L.C., Cyrus Capital Partners, L.P., FIN Capital Partners LP, Hawk Ridge Capital Management LP, Keyframe Capital Partners, L.P., Newtyn Management, LLC, Sessa Capital (Master), L.P. and Whitebox Multi-Strategy Partners, L.P. (the “Equity Backstop Parties”) on a fully committed basis.
In accordance with the terms of the Plan Support Agreement, on January 22, 2021, the Debtors entered into an Equity Backstop Commitment Agreement (the “Equity Backstop Commitment Agreement”) with the Equity Backstop Parties, the material terms of which include, among other things:
| | • | | The conduct of the Rights Offering by the Company; |
| | • | | The commitment of each Equity Backstop Party to (i) exercise its rights, as a stockholder of the Company, to purchase shares of the Series A Preferred Stock in the Rights Offering and (ii) purchase, on a pro rata basis (in accordance with percentages set forth in the Equity Backstop Commitment Agreement), shares of Series A Preferred Stock which were offered but not subscribed for in the Rights Offering; |
| | • | | Reimbursement by the Debtors of professional fees and expenses and filing fees incurred by the Equity Backstop Parties in connection with the Chapter 11 Cases in an aggregate amount that, together with and inclusive of amounts to be reimbursed pursuant to the Plan Support Agreement, do not exceed $25 million prior to the Debtors’ emergence from the Chapter 11 Cases; and |
| | • | | Indemnification by the Debtors of losses, claims, damages, liabilities, costs and expenses incurred by the Equity Backstop Parties in connection with the Restructuring Transactions. |
The Equity Backstop Commitment Agreement contains customary representations, warranties and covenants. The Equity Backstop Commitment Agreement is subject to certain termination events, including, without limitation, (a) by mutual agreement of the parties, (b) by the Company following an uncured breach of a representation, warranty or covenant in the Equity Backstop Commitment Agreement by an Equity Backstop Party, or (c) by the Equity Backstop Parties constituting each of Centerbridge, Oaktree and a number of the other Equity Backstop Parties holding at least a majority of the rights to purchase Series A Preferred Stock pursuant to the Plan Support Agreement (excluding any such rights held by Centerbridge and Oaktree) following an uncured breach by the Debtors of a representation, warranty or covenant in the Equity Backstop Commitment Agreement. The Equity Backstop Commitment Agreement will automatically terminate if the Plan Support Agreement terminates with respect to the rights and obligations of the Debtors prior to the occurrence of the effective date of the Approved Plan in accordance with its terms.
The foregoing description of the Equity Backstop Commitment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Equity Backstop Commitment Agreement, which is furnished as Exhibit 10.1 hereto and incorporated herein by reference.
| Item 7.01 | Regulation FD Disclosure. |
In connection with the Plan Support Agreement, on January 22, 2021, the Debtors filed a Chapter 11 plan of reorganization (the “Proposed Plan”) and a related disclosure statement (the “Proposed Disclosure Statement”) with the Bankruptcy Court. The Proposed Plan is intended to implement the Restructuring Transactions contemplated by the Plan Support Agreement.
