After reporting a $663 million loss in 2008 and watching its stock fall to 13 cents a share, analysts said a bankruptcy filing by Visteon Corp. could be triggered by March 10 when the company's next large interest payment is due.
The Van Buren Township-based supplier said Wednesday during its earnings call that it cannot assure compliance with the terms of its debt covenants and has essentially tapped all available credit, leading to widespread bankruptcy concerns.
"Clearly the stock market thinks Visteon is going away," said Brett Hoselton, a Cleveland-based senior auto analyst with Keybanc Capital Markets. "At 13 cents, the likelihood seems high."
Visteon won't comment on bankruptcy speculation, said spokesman Jim Fisher.
In a statement, the company said it "cannot assure that it will remain in compliance with the terms of its outstanding debt instruments."
Defaulting on its loans could prove expensive in terms of fees, higher interest rates and reduced available liquidity, said bankruptcy specialist Tom Spillane of Foley and Lardner LLC.
CEO Donald Stebbins said efforts to reduce costs are increasing at the company.
There were concerns in the investment community that a bankruptcy filing would be timed to Wednesday's earnings release. With that passed, the next key date is March 10 when an interest payment of $16 million is due on long-term bonds.
Visteon reported a $328 million net loss for the fourth quarter compared with a year-earlier net loss of $43 million. Net loss for the year totaled $663 million or $5.12 per share on sales of $9.5 billion, compared with a net loss of $372 million on sales of $11.3 billion in 2007.
Visteon said it "continues to explore options to address future liquidity needs, including administrative reductions, delaying capital expenditures, curtailing, eliminating or disposing of substantial assets or operations, or undertaking other significant restructuring measures."
It is unclear how long Visteon can go without filing for bankruptcy, said Jim Gillette, director of financial services in the Grand Rapids office of CSM Worldwide. Banks are hoping the government will grant a request from the supply community for $18.5 billion in aid, or at least guarantee accounts receivables so companies can get financing, he said.
Visteon drew $75 million from its revolving credit in 2008 and tapped the remaining $30 million in January.
More credit would be available if the amount of receivables upon which it is based grew, Visteon's Fisher said.
Though Visteon will not comment on bankruptcy speculation, the company -- like many suppliers -- has retained the services of two bankruptcy advisers, Kirkland & Ellis and Rothschild, since 2003.
Visteon stock fell 2 cents Wednesday and the company is in danger of being de-listed from the New York Stock Exchange. A business plan has been filed to try to stave that off, Fisher said. The NYSE is to outline the next step in mid-March.
Hoselton noted that Visteon's stock is not worth much more than that of bankrupt Delphi Corp., which is trading at 5 cents a share. Delphi was spun off from General Motors Corp. in 1999. Delphi filed for bankruptcy protection in October 2005 but has been unable to get financing to emerge. Visteon could have similar problems getting financing to emerge if it also sought court protection, analysts said.
Visteon was spun off from Ford Motor Co. in 2000 and has not shown a profit since.
Ford recently said it would not bail out its former parts division like it did in 2005 when it took back some unionized plants.
"Visteon maintains regular contact with us and we continue to work with them as appropriate," said Ford spokesman Todd Nissen. He said Ford does not expect production disruptions and is monitoring Visteon closely.
Ford still accounts for 34 percent of Visteon's business, down from 38 percent in 2007 and 85 percent in 2000. Ford contributed $2.6 billion in sales last year.
Visteon CEO Donald Stebbins said cost-cutting efforts are being stepped up at Visteon. The continued decline in the industry has prompted an extension of plans announced last October to reduce the global salaried headcount by 800 by the end of the March. That figure has been increased to 1,000, Stebbins said.
So far, 625 have been removed from the payroll, with most to be gone by spring for a savings of $90 million, Stebbins said, although it will cost $75 million to implement the cuts. Visteon had 7,200 salaried workers in 2006 and will be about 5,500 by the end of this year.
A hiring freeze is in effect and the company has suspended its 401(k) match.
On the manufacturing side, 9,300, or 27 percent, of manufacturing jobs were eliminated in 2008, he said. There are about 2,400 Visteon employees in Michigan, including 1,800 at its headquarters and 550 in three interiors manufacturing plants.
Executives said they will not provide any further financial guidance for the company and did not take questions in the earnings call with investors.In 2008, Visteon cut capital expenditures by 22 percent to $294 million.