March 6, 2009 at 12:12 pm

Visteon teeters near Chapter 11

New York Stock Exchange delists parts supplier amid low trading volume, 2-cent stock price.

The odds for Visteon Corp.'s survival dropped with the New York Stock Exchange's suspension of the supplier's common stock at the end of trading Thursday, analysts said.

The stock was delisted because of the low trading volume and low price.

Delisting is "not the biggest of their problems," said Jim Gillette, director of financial services for CSM Worldwide in Grand Rapids. The NYSE has strict criteria on price and market capitalization, he said, which Visteon no longer met. Visteon's market capitalization was about $2.6 million on Thursday.

Visteon stock closed at 2-cents a share Thursday. By comparison, bankrupt Delphi Corp. is trading nearly three times higher.

The bigger issue, analysts said, is when Visteon will file for bankruptcy.

"We've been expecting it, based on where Visteon is trading and where the market cap is," said Mike Ward, CSM's supplier analyst.

Gillette said he expects a Chapter 11 filing as early as Tuesday, which is when $16 million in interest is due on $440 million in bonds trading at a fraction of their original value.

"I don't think they have a lot of choice."

The supplier has some cash, but industry watchers such as Gillette expect Visteon to default on the payment because it is helpful to have cash when debtor-in-possession financing is hard to secure in today's credit crunch.

The automotive supply industry faces significant hurdles and has asked for $18.5 billion in government loans. That would help Visteon and a number of other suppliers on the brink because they have little or no cash or receivables with which to pay their bills and continue operations, Gillette said. "A lot of other suppliers are close to filing. It could be chaos. A lot of banks are sweating too because covenants are not being paid."

Visteon spokesman Jim Fisher would not comment on bankruptcy speculation. Nor would he confirm an all-employees meeting planned for Tuesday, but he said the supplier typically calls employee meetings around when financial earnings are released.

Visteon reported a fourth-quarter loss of $328 million Feb. 25. At that time the supplier said it could not assure compliance with the terms of its debt covenants and had essentially tapped all available credit.

Gillette said bankruptcy would likely affect North American operations, while the effect on the rest of its global operations remains questionable. He said he expects portions of Visteon's business, such as its air conditioning division, to survive if the maker of climate, interior, electronic and lighting products is dismantled.

As for Visteon stock, it was to begin trading over-the-counter on the Pink Sheets today, under the symbol VSTN. The Van Buren Township-based company was the parts arm of Ford Motor Co. until it was spun off in 2000. Ford still represents 30 percent of Visteon's business.

Visteon employs 33,500 people, including 2,400 in Michigan.

"It's a tough situation out there for many suppliers," CSM's Ward said. "Visteon is the current manifestation of that."

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