KPS Capital Partners Agrees To Acquire Substantially All Of The Assets Of Garrett Motion Inc.

Rhea-AI Summary

KPS Capital Partners has entered into a $2.1 billion stock and asset purchase agreement to acquire substantially all assets of Garrett Motion Inc. (NYSE: GTX). This acquisition follows Garrett's voluntary Chapter 11 bankruptcy filing aimed at restructuring. KPS seeks designation as the 'stalking horse bidder' to ensure a competitive sale process. To support operations during restructuring, KPS will also provide Debtor in Possession (DIP) financing. The completion of the acquisition is subject to court approval and expected in early 2021.

Positive

• Acquisition of Garrett's assets for $2.1 billion can lead to operational synergies.
• KPS's investment may enhance Garrett's financial stability and growth opportunities.
• Garrett's position as a leader in turbocharger and electrification technologies supports potential revenue growth.

Negative

• Chapter 11 filing indicates significant financial distress and liabilities.
• The acquisition is contingent on court approval, introducing uncertainty.
• DIP financing may imply previous operational challenges affecting business continuity.

KPS TO PARTICIPATE IN COMPANY'S DIP FINANCING TO SUPPORT OPERATIONS

KPS HAS OBTAINED COMMITTED EXIT FINANCING

NEW YORK, Sept. 20, 2020 /PRNewswire/ -- KPS Capital Partners, LP ("KPS") announced today that, through a newly formed affiliate, it has entered into a stock and asset purchase agreement with Garrett Motion Inc. (NYSE: GTX) ("Garrett" or the "Company"), under which KPS will acquire substantially all of the assets of Garrett for approximately $2.1 billion. 

Garrett will file a motion with the United States Bankruptcy Court for the Southern District of New York today seeking the designation of KPS as the "stalking horse bidder" in a bidding procedures motion in connection with the Company's filing of voluntary petitions under Chapter 11 of the Bankruptcy Code.  KPS was selected by Garrett after a comprehensive review of strategic alternatives by the Company's Board of Directors.  To facilitate the sale process, Garrett has begun a process in the United States to financially restructure through a voluntary Chapter 11 proceeding.  The completion of the sale is subject to court approval, among other customary conditions.  KPS currently expects the sale process to be completed in early 2021.

KPS, through an affiliate, has also agreed to participate in Garrett's Debtor in Possession ("DIP") financing to support the Company's operations.  Following court approval, the DIP facility will ensure that Garrett has sufficient liquidity to continue normal operations and continue to meet its financial obligations during the Chapter 11 process, including the timely payment of employee wages and benefits, continued servicing of customer orders and shipments, and other obligations.

A syndicate of banks including Citi, UBS Investment Bank, Credit Suisse and BNP PARIBAS, have committed to provide exit financing to the KPS stalking horse acquisition vehicle to acquire Garrett.  The exit financing is subject to completion of the acquisition and customary closing conditions.

Raquel Vargas Palmer, Managing Partner of KPS, said, "We proceed with great conviction and enthusiasm to acquire Garrett, a global leader in turbocharger and electrification technologies, serving nearly every major automotive and commercial vehicle OEM in the world.  Garrett enjoys a leading market position, scale, world class research and development sites, and state-of-the-art manufacturing and engineering facilities strategically located around the globe.  We look forward to working with the Company's leadership team and employees to accelerate its many attractive growth opportunities as well as increase its already substantial investment in research and development, technology and new product development.

"KPS has invested an enormous amount of effort, resources and capital to acquire Garrett. We are committed to the expeditious acquisition of Garrett to provide certainty of outcome and confidence in the new Company's future for all of its stakeholders, including customers, employees and suppliers.  The Company and its stakeholders will benefit from KPS' demonstrated track record and decades long history of successfully investing in the automotive and transportation industries globally, commitment to manufacturing excellence, continuous improvement and access to our significant financial resources.  The new Garrett will be conservatively capitalized and not encumbered by its predecessor's significant liabilities." 

UBS Investment Bank and Credit Suisse are acting as financial advisors, and Davis Polk & Wardwell LLP is acting as legal counsel to KPS with respect to the transaction.

About Garrett Motion Inc.

Garrett, headquartered in Rolle, Switzerland, is a differentiated technology leader, serving customers worldwide for more than 65 years with passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions. Garrett's cutting-edge technology enables vehicles to become safer, and more connected, efficient and environmentally friendly. Our portfolio of turbocharging, electric boosting and automotive software solutions empowers the transportation industry to redefine and further advance motion.  For additional information, please visit www.garrettmotion.com

About KPS Capital Partners, LP

KPS, through its affiliated management entities, is the manager of the KPS Special Situations Funds, a family of investment funds with over $11.5 billion of assets under management (as of June 30, 2020).  For over two decades, the Partners of KPS have worked exclusively to realize significant capital appreciation by making controlling equity investments in manufacturing and industrial companies across a diverse array of industries, including basic materials, branded consumer, healthcare and luxury products, automotive parts, capital equipment and general manufacturing.  KPS creates value for its investors by working constructively with talented management teams to make businesses better, and generates investment returns by structurally improving the strategic position, competitiveness and profitability of its portfolio companies, rather than primarily relying on financial leverage. The KPS Funds' portfolio companies have aggregate annual revenues of approximately $7.7 billion, operate 146 manufacturing facilities in 26 countries, and have approximately 26,000 employees, directly and through joint ventures worldwide. The KPS investment strategy and portfolio companies are described in detail at www.kpsfund.com.

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SOURCE KPS Capital Partners, LP

FAQ

What is KPS Capital Partners' acquisition of Garrett Motion Inc.?

KPS is acquiring substantially all Garrett's assets for $2.1 billion following its Chapter 11 bankruptcy filing.

When is the expected completion date for the acquisition of Garrett Motion?

The acquisition is expected to be completed in early 2021, pending court approval.

What does the Debtor in Possession (DIP) financing mean for Garrett Motion?

DIP financing ensures Garrett has liquidity to support operations during the Chapter 11 restructuring process.

Why did Garrett Motion file for Chapter 11?

Garrett filed for Chapter 11 to restructure its finances and address significant liabilities.

What are KPS Capital Partners' plans for Garrett Motion after the acquisition?

KPS aims to enhance Garrett's growth opportunities and invest significantly in research and development.