Intermet, customers reach supply agreement in response to rejection motion; restructuring deadlines set

By Caroline Salls

Pittsburgh, Sept. 12 - Intermet Corp. is seeking court approval of an agreement negotiated with its major customers in response to Intermet's motion to reject customer supply contracts, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

The customers include General Motors Corp., Chrysler LLC, Dana Holding Corp., Kelsey-Hayes Co., TRW Integrated Chassis Systems LLC and TRW Canada Ltd., Linamar Corp., Continental Automotive Systems US, Inc., ZF Lemforder Corp., Magna Powertrain USA, Inc., Manufacturera de Ciguenales de Mexico SA de CV and ThyssenKrpp Presta Terra Haute, LLC.

Under the agreement:

• Intermet will continue to be the exclusive provider of the customers' component parts, beginning with the plan of reorganization effective date, through 21 months from the plan effective date.

If Intermet is not currently the sole provider to a customer, it will continue to supply the customer at existing levels;

• The customers will pay 90% of the amount of valid accounts payable before the bankruptcy filing date within five days of the plan effective date if the court allows the supplier to continue using cash collateral on terms necessary to sustain ongoing operations through the sooner of court approval of debtor-in-possession financing or Oct. 31 and the court enters an order approving a 10% setoff against pre-bankruptcy accounts;

• If no event of default occurs, each customer has agreed not to resource any current business through the agreement period;

• Each customer will provide price increases or other financial support to Intermet in order to satisfy the company's agreed upon cash needs during the agreement term, with the financing terms to be filed under seal;

• Within 45 days of an event of default, Intermet has agreed to grant each customer an exclusive option to purchase company-owned equipment, tooling and machinery that is used for the manufacturing of component parts; and

• If no default occurs, the customers have agreed to support an Intermet merger, sale, restructuring or other business transaction with one or more qualified parties, which includes reorganized Intermet if it meets specified conditions.

Deadlines

The agreement also sets a timeline, under which the company must secure approval of a final DIP financing order by Oct. 31; obtain approval of a plan for payment of unfunded pension plan and retiree benefit debts by March 31, 2009; execute a merger or asset purchase agreement with a qualified party by April 30, 2009 or file and obtain confirmation of a plan of reorganization by June 30, 2009 that will result in a qualified restructured entity.

On Aug. 12, Intermet requested court approval to reject all 19 of its customer contracts, according to Thursday's motion. The court approved rejection of Intermet's contracts with Ford Motor Co., Automotive Components Holdings, LLC and Auto Alliance on Sept 9.

A hearing is scheduled for Sept. 16.

Intermet, a Fort Worth, Texas-based automotive cast component supplier, filed for bankruptcy on Aug. 12. Its Chapter 11 case number is 08-11859.

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