Lear files for bankruptcy in downturn

US company Lear, which has been weighed down by heavy debts and a sharp decline in automobile demand, said the reorganisation had won the support of the majority of its creditors and it expected to submit the proposals to the bankruptcy court in coming days.

Under the plans set out on Monday, Lear would convert $3.6bn of debt into a combination of new debt, convertible stock and equity warrants. It has not yet given a timetable for bankruptcy.

The company now says its bankruptcy plan — the largest in a string of failures of auto parts suppliers – was supported by about 68 per cent of its secured lenders.

Lear had breached its leverage covenants at the end of 2008 after borrowing all of the $1.2bn in its main credit facility.

Lear, which makes seating and electrical equipment for vehicles, made its filing in the US bankruptcy court for the Southern District of New York.

It listed total assets of about $1.27bn and total liabilities of about $4.54bn. JP Morgan and Citigroup are its secured lenders.