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SOUTHFIELD, MI-Following in the footsteps of GM and Chrysler, Lear Corp, a supplier of automotive seating and electrical distribution systems, is preparing to file for Chapter 11 bankruptcy protection. The locally-based company, after meeting with steering committees from its bondholders and secured lenders, has agreed to repay in full its trade creditors, with certain limitations.

According to a release about the impending filing, “The Company anticipates being in default under its 8.50% Senior Notes due in 2013 and 8.75% Senior Notes due in 2016, as the 30-day grace period applicable to the semi-annual interest payment due on such notes will expire on July 2, 2009.” Also with the Chapter 11 filing in mind, the company did not make principal or interest payments on its senior credit facility due June 30.

Both JP Morgan and Citigroup are leading a group of secured lenders in committing $500 million in new money debtor-in-possession financing. The DIP financing will be utilized, after Lear emerges from bankruptcy for exit financing with a three-year term.<p."This restructuring is being undertaken to maximize the long-term value of the company," says Bob Rossiter, chairman, CEO and president, "…We intend to complete the restructuring as quickly as possible, and emerge as an even stronger and more competitive partner to our customers."

The filing will include both US and Canadian subsidiaries, but will exclude those outside the two countries.

During the court restructuring process, Lear plans to continue to operate its business. “We want to assure everyone – customers, suppliers, employees, and the communities of which we are a part – that Lear is committed to positioning our business for sustainable success. We believe that the agreement in principle with the steering committees of our secured lenders and bondholders to support our plan of reorganization will enable us to emerge expeditiously,” Rossiter says.

Throughout the 36 countries it is located in, Lear employees more than 8,000 people in 210 assets. The company was founded in 1917 and went public in 1994. In 2008 its annual net sales totalled $13.6 billion. For Q1 its net sales fell 44% from the previous year to $2.2 billion.

“Given the adverse economic conditions and dramatic slowdown in automotive demand at the end of last year, many of our major customers had extended plant shutdowns in the first quarter,” says Rossiter in the company’s Q1 earrings release. “As a result, production was down sharply in North America and Europe. In this difficult environment, we are minimizing our operating costs and accelerating our restructuring efforts.”

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