In connection with a planned debt-to-equity swap – see Plasteurope.com of 15.12.2008 – automotive supplier Key Plastics (Farmington Hills, Michigan / USA; www.keyplastics.com) and its affiliated financing company Key Plastics Finance have filed a petition under Chapter 11 of US insolvency law. The case will be heard by judge Mary F. Walrath at the bankruptcy court in Wilmington, Delaware.

Key Plastics and its two main creditors, Wayzata Investment and DDJ Capital Management, recently agreed on the transaction – scheduled to be completed by the end of January 2009 – to manage the OEM supplier’s entire long-term debt of USD 115m. Following the “pre-packaged reorganisation” – the US term means that that the majority of creditors approved the arrangement before the Chapter 11 petition was filed – Wayzata would hold around 60% of Key Plastic shares. The private equity investor is prepared to inject USD 20m fresh capital into company to fund the planned restructuring.

Key Plastics CFO John B. Wilson told Plasteurope.com that orders have recently dropped off significantly, resulting in the need for capacity adjustments. Key Plastics has nine production facilities in North America. As part of the restructuring plan it will close two plants with around 300 employees – one in Canada and the other in York, Pennsylvania. “But that is not the end of the road,” Wilson said. At least one more plant will be closed next year. He forecasts restructuring costs of USD 3-4m and sales of around USD 600m in 2008.

It is not year clear how the transaction will affect businesses outside the US. According to Helmut Hinkel, managing director of the company’s North Division in Europe, these operate relatively independently. Initially, at least, European subsidiaries are unlikely to be affected.