Nissan and Stellantis supplier Marelli files for Chapter 11 bankruptcy in the US

Updated on June 12 – Following on from earlier reports, first covered by Japanese news agency Kyodo, parts supplier Marelli has filed for Chapter 11 bankruptcy with US courts.

In a statement on the matter, the company comments that it expects no disruption from the filing and will continue to supply OEMs, such as Nissan and Stellantis, as normal while it ”comprehensively restructure[s] its long-term debt obligations.”

The Italian-Japanese tier one supplier is owned by US private equity firm KKR, which first purchased Calsonic Kansei from Nissan Motor for 500 billion yen ($4.5 billion) in 2016. Through Calsonic Kansei it then purchased Magneti Marelli from Fiat Chrysler Automobiles (later Stellantis), in 2019 for $7 billion, merging the two tier one suppliers into one company under the Marelli name. It remains a key supplier to both Nissan and Stellantis, covering everything from lighting and interior components to propulsion, exhaust and chassis parts.  

Following the filing on Wednesday, president and CEO David Slump stated: ”While we are pleased with our recent progress and profitability, industry-wide market pressures have created a gap in working capital that must be addressed. After careful review of the Company’s strategic alternatives, we have determined that entering the Chapter 11 process is the best path to strengthen Marelli’s balance sheet by converting debt to equity, while ensuring we continue operating as usual.”

As part of the filings, Marelli submitted motions that would allow it to continue operations throughout the Chapter 11 process, including the ”continuation of programs that are integral to customer relationships.” This is dependent on court approval, but support remains from Marelli’s partners – in a statement, Nissan commented that it ”appreciate[s] Marelli’s efforts to minimise operational disruption.”

To help fund the Chapter 11 process, Marelli has received additional financing from its lenders, with $1.1 billion being raised in debtor-in-processing (DIP) financing. The company reports that 80% of its lenders have signed a Restructuring Support Agreement to deleverage Marelli’s balance and see the DIP lenders take ownership of the business following both the Chapter 11 process and a 45-day overbid process.

The 45-day overbid process allows other companies to purchase Marelli, rather than ownership fall to the DIP lenders. Markets news source Nikkei previously reported that Indian supplier Motherson Group is one such potential bidder, with Marelli leadership sharing details of a buyout offer from Motherson’s to its debt holders in late May, to mixed support. Motherson’s offer was not disclosed, but Marelli reported assets and liabilities ranging between $1 billion and $10 billion in the filing.  

This is the second potential restructuring effort by Marelli in the last few years. It previously sought debt negotiations in 2022, with sources revealing to Bloomberg a debt total of $9.5 billion. The sources pointed to poor recovery from the Covid-19 pandemic, which saw Marelli plants shutdown, as being a key factor to the debt. Chairman Dinesh Paliwal also commented that the supplier had “the highest fixed cost among our competitors”, as being another cause for the economic trouble – although it remains to be seen if this is still the case.