(Bloomberg) -- Marelli Holdings Co., the auto-parts supplier seeking to renegotiate its debt, selected current owner KKR & Co. as its sponsor in order to restructure the business.

Hiroshi Watanabe, a spokesman for Saitama, Japan-based Marelli, confirmed the decision following a meeting with creditors on Tuesday. “Their capital reallocation proposal and restructuring plan were the best,” Watanabe said. A representative for KKR didn’t immediately respond to a request for comment.

As part of the turnaround plan, Marelli is seeking the cancellation of about 450 billion yen ($3.5 billion) in debt, out of obligations of about 1.13 trillion yen, according to people with knowledge of the matter. Some of the debt will be converted into equity, said the people, who asked not to be identified because the negotiations aren’t public.  

A key supplier for automakers Nissan Motor Co. and Stellantis NV, Marelli filed in March for an alternative dispute resolution, or ADR, procedure in Japan, which lets a company under financial strain continue to operate while renegotiating its debt with creditors. Marelli was created in 2019 when KKR merged its Calsonic Kansei and Magneti Marelli units.

 

KKR will write off 200 billion yen of its stake and put up $650 million in new capital to acquire new shares via a third-party allocation, the people said. The investor edged out Bain Capital and Apollo Global Management, which had joined forces to submit a counter-bid, people with knowledge of the matter have said.

Marelli’s revenue plummeted last year as the coronavirus pandemic took hold, disrupting supply chains, chip availability and automobile manufacturing across the globe. The company employs about 54,000 people and operates about 170 facilities around the world to manufacture lighting systems, air conditioning, electric motors, suspensions and other components for carmakers across the globe. 

Marelli’s goal is to seek the approval of Mizuho Financial Group Inc. and other lenders at a creditors meeting in order to complete the ADR process. The ADR proposal can then be ratified at a formal meeting between Marelli and its lenders scheduled for June.

During the ADR process, negotiations between a company and its creditors are facilitated by an independent group of mediators with legal and accounting expertise, who are chosen by the Japanese Association of Turnaround Professionals and appointed by the economy ministry.

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