Collins & Aikman customer financing agreement gets final court OK

By Caroline Salls

Pittsburgh, Aug. 16 - Collins & Aikman Corp. 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, according to a Tuesday filing with the U.S. Bankruptcy Court for the Eastern District of Michigan.

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.

The financing provided by this customer agreement is supplemental to the court-authorized $150 million interim DIP financing provided by JPMorgan and the $30 million post-petition financing previously obtained by Collins & Aikman from the same customer group.

Along with the company's cash from operations, funds available under the terms of this agreement will be used for operating needs.

The company received interim approval of the agreement on July 7.

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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