Collins & Aikman, major customers agree to short contract negotiations extension

By Caroline Salls

Pittsburgh, Sept. 15 - Collins & Aikman Corp. reached an agreement with its major customers to extend the deadline to complete contract renegotiations until no later than Sept. 22, according to a company news release.

"Because we have made significant progress with our principal customers in our contract negotiations, we felt that a short extension was appropriate to allow us sufficient time to finalize consensual agreements with them," chief restructuring officer John R. Boken said in the release.

This extension will delay the company's ability to file motions to reject customer contracts by up to one week while the negotiations continue.

On Aug. 16, Collins & Aikman obtained final court approval for its customer financing agreement, which will provide $82.5 million of price increases under existing contracts, an additional $82.5 million of post-petition financing, together with funding of about $140 million of capital requirements.

Collins & Aikman's six largest customers, DaimlerChrysler AG, Ford Motor Co., General Motors Corp., Honda Motor Corp., Nissan Motor Co. and Toyota Motor Corp., signed the agreement.

Under the agreement, Collins & Aikman will benefit from:

* $82.5 million in immediate price increases, equivalent to $330 million on an annualized basis;

* Relief from capital expenditures, new product launches and tooling totaling $140 million;

* A framework for price negotiations, plus the ability to reject contracts on Oct. 1 if the negotiations fail;

* A framework to develop a business plan in the next 60 days;

* Adequate liquidity through Sept. 30;

* Customers will pay within five days, without discounts;

* Continuing relationships with its customers.

The new $82.5 million subordinated DIP financing will be junior to the existing secured loans.

Collins & Aikman, a Troy, Mich.-based automotive company, filed for Chapter 11 on May 17 in the U.S. Bankruptcy Court for the Eastern District of Michigan. Its case number is 05-55927.

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