www.theglobeandmail.com/servlet/story/RTGAM.20090406.WB -
[Cached Version]
Published on: 4/6/2009
Last Visited: 4/6/2009
While useful information, the disclosure drew criticism Friday from BMO Nesbitt Burns analyst Peter Sklar, who wanted more details from Linamar.
Other parts companies will face similar pressure.
The 20-day threshold on payments owed from GM and Chrysler is important because, as Mr. Sklar noted: "Linamar understands that receivables relating to goods delivered within 20 days of a Chapter 11 filing are protected under U.S. bankruptcy law, whereas goods shipped outside of this 20-day period are at risk."
While Linamar's press release is good news, Mr. Sklar said he had "concerns" that the part company may have larger issues if GM or Chrysler file for creditor protection.
"Even where prebankruptcy receivables less than 20 days old are protected, recovery could take some time and Linamar could be required to secure another source of financing in the interim," Mr. Sklar said, adding: "The receivable exposure that Linamar has articulated related only to its direct exposure to GM and Chrysler, and does not reflect its indirect exposure."
Linamar may be indirectly exposed to problems at other parts suppliers that are forced into bankruptcy filings as the sector restructures, said the BMO Nesbitt Burns analyst.
He added: "It is possible that Ford may also be required to enter into a Chapter 11 restructuring in order to remain competitive with GM and Chrysler, whose cost structures will benefit from the restructuring."