Lear Plans to File For Chapter 11

By Dan Strumpf

NEW YORK -- Automotive parts supplier Lear(LEA Quote) said it is preparing to file for Chapter 11 bankruptcy protection and has lined up financing to fund its operations while under court protection.

Lear, which makes automotive seating systems and electronics, said it is still negotiating with lenders and bondholders for additional support for its restructuring plan. In the meantime, the company said Wednesday it has a commitment for $500 million in loans to finance its bankruptcy from a group of lenders led by JPMorgan Chase and Citigroup.

Lear spokesman Mel Stephens declined to say how many of its lenders are on board with the Chapter 11 plan, how much more support it is seeking or when or where the Southfield, Mich.-based company plans to file for court protection.

"We intend to complete the restructuring as quickly as possible and emerge as an even stronger and more competitive partner to our customers," Lear CEO Bob Rossiter said in a statement.

Lear said it expects to default on a $38 million interest payment that would service its 8.5% senior notes due 2013 and its 8.75% senior notes due 2016. A 30-day grace period on the payment expires on Thursday, the company said.

Lear said its operations outside the United States would be unaffected by a bankruptcy protection filing.

A filing for Lear would make it the first major automotive parts maker to seek court protection since Visteon, the former parts arm of Ford(F Quote), filed for Chapter 11 in May. Parts suppliers have been battered by the economic downturn as consumers continue to shun new car purchases and automakers slash production.