Takata unit agrees to terms to resolve objections; hearing adjourned

By Caroline Salls

Pittsburgh, Feb. 12 – Takata Corp. subsidiary TK Holdings Inc. will file an amended plan of reorganization after entering into term sheets with the official committee of unsecured creditors, a plan sponsor and original equipment manufacturers, as well as with tort claimants and a future claims representatives to resolve potential plan objections, according to a notice filed Saturday with the U.S. Bankruptcy Court for the District of Delaware.

Under the terms reached with the committee, sponsor and OEMs, a support party creditor fund will be established under the plan to fund the payment of settlement amounts to holders of class six “other general unsecured claims” that are non-contingent and liquidated as of the plan effective date.

The sponsor will assume specified third-party trade contracts.

In addition, the TK Holdings U.S. acquisition agreement will be amended to provide that the plan sponsor may exclude any purchase contract as long as, as a result of exclusion, the total amount of pre-bankruptcy claims generated does not exceed $2 million, if the total amount of cure claims exceeds $60 million, the sponsor and the TK debtors will have the right to reject contracts and, in connection with contracts that were not disclosed on the schedule of rejected contracts filed on Jan. 30, the sponsor will have the right to reject assumption of those contracts.

So long as the consenting OEMs have received distribution on account of their general unsecured claims, on the plan effective date they will contribute $5 million to the support party creditor fund.

Any amount remaining of the $5 million cure claims cap payable by the plan sponsor under the U.S. acquisition agreement will constitute the plan sponsor’s contribution to the support party creditor fund.

To the extent that the excess amount is less than $2.5 million, the plan sponsor will contribute an additional amount so its total contribution is $2.5 million.

Claimants’ agreement

Meanwhile, under the claimants and future claims term sheet, the plan will be amended to provide that other personal injury/wrongful death claims are to be treated in a separate class or subclass under the plan and will be subject to liquidation and/or reconciliation and payment by a trust.

The trust reserve amount for expenses will be increased to include the approximate proportional amount of funding that otherwise was to be included in the reorganized TK Holdings trust reserve for claims reconciliation and payment expenses, and the TK debtors will transfer to the trust available cash allocable on account of such other PI/WD claims under the plan’s distribution formula.

In exchange for the release of the plan sponsor parties under the plan and a channeling injunction, the plan sponsor will contribute to the trust the difference between $25 million and a “Section 7.12” amount or $25 million.

TKJP has been asked to assign or transfer Takata Group’s product liability insurance to the trust, and the TK debtors have agreed to assign and transfer whatever rights they have in any of Takata Group’s product liability insurance to the trust.

Also under the claimants’ term sheet, the plan parties will reduce a plan sponsor backstop funding agreement to $50 million from $75 million, or the company will provide a backstop funding request certificate for $25 million that will be repaid to the plan sponsor and contributed to the trust.

The total amount of allowed consenting OEM unsecured claims will be no less than $38.65 million.

The initial period for consenting OEMs to opt-in to a channeling injunction to become participating OEMs will be extended to 18 months following the effective date, with no required option payments. An extended opt-in period will run for 48 months with a cost of $10 million.

Plan hearing adjourned

TK Holdings said its plan confirmation hearing will not begin on Feb. 13 as scheduled. The company said it is working with parties in interest and the court to reschedule the Confirmation Hearing to no earlier than Feb. 15.

Tokyo-based Takata manufactures and sells motor vehicle seat belts, airbags, steering wheels, interior trims and child restraint systems. TK Holdings filed for bankruptcy on June 25, 2017 under Chapter 11 case number 17-11375.

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