Advice to Volkswagen on the global restructuring of Takata
In February 2017, Takata Corporation pleaded guilty to wire fraud in connection with the Takata group's manufacture of airbag inflators containing non-desiccated phase-stabilized ammonium nitrate (“PSAN”), and agreed to pay $850 million in restitution to original equipment manufacturers (“OEMs”), including Volkswagen. Since then, Takata Corporation has entered into civil rehabilitation in Japan, while Takata's U.S. and Mexican entities have entered into chapter 11 bankruptcy in the Bankruptcy Court for the District of Delaware.
In that context, Takata and its OEM customers have negotiated a global restructuring, under which Takata will sell its non-PSAN production lines to Key Safety Systems (“KSS”) and place its PSAN-related production lines into a trust for the purpose of producing airbag replacement kits for certain OEMs and otherwise mitigating the ongoing recalls of its PSAN-based inflators. Under the terms of a global settlement agreement, a restructuring support agreement and other documents, Takata’s major customers (including certain Volkswagen entities) have agreed to support Takata’s global restructuring, including the sale to KSS.
On February 16, 2018, the U.S. bankruptcy court confirmed the chapter 11 debtors’ plan of reorganization over several objections, clearing the way for Takata to consummate its sale to KSS and satisfy its restitution obligations to its customers.
Takata is one of the largest global producers of automotive safety parts, including seat belts, child restraints and airbags. Its products are incorporated into vehicles of nearly every major OEM.
The Davis Polk restructuring team includes partners Timothy Graulich and Darren S. Klein and associates Natasha Tsiouris, Aryeh E. Falk, Benjamin M. Schak and Eugene Y. Park. The litigation team includes partner Elliot Moskowitz, counsel Michael J. Russano, and associates Nikolaus Williams and Cindy S. McNair. All members of the Davis Polk team are based in the New York office.