American Axle & Manufacturing Holdings Inc. appears to have avoided the fate of many of its auto parts brethren, reaching a deal with former parent General Motors Co. to secure $210 million in support that the company hopes will allow it to avoid a bankruptcy filing.
Detroit-based American Axle in a
regulatory filing late Thursday said the deals include a $110 million payment and a $100 million loan in return for stock warrants from Axle. The payment stems from costs associated with GM's own bankruptcy, which was concluded over the summer. Axle also has negotiated more favorable terms on loans and credit facilities led by J.P. Morgan Chase & Co. (NYSE:JPM) and Bank of America Corp. (NYSE:BAC).
With the deal Axle appears to have done what rivals including Lear Corp., Visteon Corp. and Metaldyne Corp. could not: work out a plan to avoid a Chapter 11 filing. GM's benevolence seems to stem from the importance of Axle's parts to its pickup lines, and a belief that the company's problems were tied to the broader economic slump that has caused havoc throughout the auto business and not to a need for the company to undergo a radical restructuring.
But the aid did come at a steep price. Axle will pay a quarterly interest rate on the GM loan of at least 14%, and has pledged to issue warrants for up to 11 million shares of its common stock. GM has agreed not to acquire more than 20% of Axle, which was formed in 1994 when the automaker sold a unit of its Saginaw, Mich., operations to a group of private investors. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive,
transportation and industrial sectors. Follow him on Twitter
@louwhiteman
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