Narrative
Full Description
Project narrative
In 2018, the Industrial and Commercial Bank of China (ICBC) provided a $500 million USD loan facility to Joyson KSS Auto Safety S.A. — a Luxembourg-subsidiary of Key Safety Systems (KSS), an American firm in Michigan that develops and manufactures automotive safety systems and wholly owned subsidiary of Chinese private sector automotive component manufacturer Ningbo Joyson Electronic Corp. — to fund its acquisition of substantially all of the global assets of Takata Corporation, a Japanese automotive parts company. This loan received a guarantee from an unspecified institution and was secured by (i.e. collateralized against) outward security for offshore lending in China. Record ID#99153 captures ICBC's $500 million USD loan. In February 2018, a syndicate of banks — China Merchants Bank Co., Ltd., the Tokyo Branch of Deutsche Bank AG, and Mizuho Bank, all serving as co-ordinating mandated lead arrangers — agreed to underwrite a $1.2 billion USD syndicated loan to Joyson KSS Auto Safety S.A. to support the acquisition of the global assets of Takata Corporation. This loan carried a maturity period of five years and consisted of a $1 billion USD term loan for the acquisition (with some proceeds to be used for refinancing) and a $200 million USD revolving credit facility (RCF) for working capital purposes. The loan included U.S. dollar, euro, and Japanese yen tranches tranches, with an interest rate of LIBOR plus a margin between 355 and 405 basis points (bps) for the euro and U.S. dollar portion depending on the borrower's net leverage ratio and LIBOR plus 295 to 385 bps for the yen tranche. The initial interest rate for the euro and U.S. dollar tranche was 380 bps and 320 bps for the yen tranche. Syndication was launched in May 2018. After syndication, the The Ningbo Branch of China Merchants contributed $50 million USD to the loan syndicate and the New York Branch of China Merchants Bank contributed $150 million USD (a total China Merchants Bank contribution of $200 million USD). Records ID#99156 and #110301 capture China Merchants Bank Ningbo Branch and New York Branch contributions. At its peak, Takata had been the world's third largest air-bag maker and producer of one-third of all seatbelts used in vehicles globally. At the time of the agreement of the acquisition, however, Takata Corporation was filing the largest bankruptcy case in Japanese manufacturing history and had already filed for Chapter 11 bankruptcy in Delaware, United States, with over $10 billion USD in liabilities. Takata-manufactured air-bag inflators contained ammonium nitrate, which, with age and prolonged exposure to heat, could cause the airbags to explode. By April 2018, the faulty inflators had been linked to at least 22 deaths around the world and numerous other injuries, primarily in the United States. In 2017, Takata pled guilty to criminal wrongdoing over the inflators, namely by concealing the safety issue via submission of false inflator test results to its automaker clients. The exploding air bags lead to a recall, beginning in 2011, of over 100 million cars by manufacturers such as Ford, Volkswagen, and Honda. The recall became the auto industry's biggest ever. As part of its U.S. Chapter 11 bankruptcy filing, Takata's U.S. subsidiary set up a fund to compensate victims and repay automaker creditors of a small portion of their $38.6 billion USD unsecured claims against the company. Additionally, as part U.S. and Japanese bankruptcy proceedings, Takata would be broken into three parts: one with its good assets, one to manufacture replacement inflators until the completion of the global recall, and an entity to oversee claim payments that would be wound down. In June 2017, KSS Holdings Inc. signed a memorandum of understanding with Takata to purchase nearly all of its assets for about ¥175 billion JPY ($1.57 billion USD), promising to keep most of Takata's employees and maintain all of its manufacturing facilities. The sale would allow Takata to continue producing replacement inflators before winding itself down. Additionally, Takata would use the proceeds of the sale to settle a plea agreement with the U.S. Department of Justice over the recall on its air-bag inflators. On November 21, 2017, the parties signed the asset acquisition agreement. The acquisition included all of the assets of the liquidated Takata Corporation excluding its phase stabilized ammonium nitrate business. The acquisition was conducted through KSS Holdings, Inc.. It also excluded Takata's liabilities for its faulty inflators. The acquisition was expected to benefit KSS and Joyson's production capacity, market access, and technology. The acquisition was completed on April 12, 2018. KSS was rebranded as Joyson Safety Systems (JSS) after the acquisition. Upon completion, Ningbo Joyson Electronics Corp. took the world's second largest market share of the auto-safety market. On October 12, 2021, financial close was reached on a deal in which a syndicate of banks — including the Ningbo Branch of China Merchants Bank — provided a $1.65 billion USD syndicated loan to Joyson KSS Auto Safety S.A. to refinance the debt used for the acquisition of Takata Corporation. China Merchants Bank served as mandated lead arranger and bookrunner and contributed $200 million USD to the syndicate. Record ID#99157 captures this contribution.