January 8, 2019

Filing Type:

Trustee: PwC

Trustee Counsel: McCarthy

Industry:

Province:

Vari-Form, a Strathroy, Ontario-based leading auto parts manufacturer, filed for protection under the CCAA on January 8, listing approximately $57.4MM in liabilities. Established in 1988, the company is the primary provider of hydroformed components to the Fiat Chrysler Automative business ("FCA") on certain Dodge Ram and Jeep lines. It is the only Canadian-based operating subsidiary in the Vari-Form Group's hydroforming business. In early 2018, the company began experiencing serious financial difficulties. It attempted to launch several new programs, including ones that used a new type of steel that significantly increased the burden on the company's equipment and processes. Due to engineering and mechanical challenges arising from the new steel, as well as unplanned downtime, management hired supplemental employees and funded significant cost overruns to protect customer schedules. As a result, the company incurred millions of dollars in excess program launch costs, which severely strained its liquidity. Despite widespread efforts over the recent months to resolve operational issues and reduce costs, including negotiations with its secured lenders, key customers and other stakeholders, the company has been unable to negotiate a sustainable solution. In November 2018, the company and its related companies retained Angle Advisors - a US-based investment banking firm - to conduct a marketing and sale process for their businesses. Based on recent cash flow statements, the company estimates that its operations are sustaining a cash burn of more than $1.0MM per week. Because the company is insolvent and unable to meet its liabilities as they become due, it requires the protections of the CCAA to obtain the liquidity needed to maintain operations while pursuing the going concern sale of its business on an expedited basis. 11032569 Canada, which is an affiliate of FCA and the proposed DIP lender, has entered into a stalking horse APA. PwC was appointed monitor. Canadian counsel is Osler for the applicant, McCarthy for the monitor, BLG for Fiat Chrysler Automobiles and 11032569 Canada and Blakes for the Term Loan Lenders under the company's Term Loan Agreement. American counsel is Jones Day for Vari-Form Holdings Group, Sullivan & Cromwell for Fiat Chrysler Automobiles and 11032569 Canada and Proskaeur Rose for the Term Loan Lenders.