After settling a dispute with its retirees, Visteon Corp. won support for its reorganization plan from its major shareholders, lenders and the bankruptcy court, and raised more than $1.3 billion by selling stock to bondholders. Visteon retirees had been the one major challenge preventing Visteon from moving forward with its plan to cut $2 billion in debt and exit bankruptcy under the control of its bondholders. Under the new deal with retirees, Visteon will pay $12 million to unions representing more than 6,000 former Visteon employees. But the Visteon bankruptcy plan has not avoided controversy, a handful of shareholders oppose the bankruptcy plan saying that they should have been given a chance to participate in the stock sale. But with about 76 percent of Visteon’s shareholders voting to support the plan, the company has successfully won the court’s approval of the bankruptcy reorganization plan and should be exiting bankruptcy soon.
In most Chapter 11 bankruptcy plans, unsecured shareholders are left with either nothing or very little compensation after secured creditors are repaid. This is one of the pitfalls of Chapter 11 bankruptcy for unsecured creditors. Also, employees are often faced with drastic losses in benefits and salaries, especially retirees who are considered a huge financial liability for the company in Chapter 11 bankruptcy. On the upside, a company that enters Chapter 11 bankruptcy with an effective strategy can unload large amounts of debt while giving their company a fighting chance of survival even in the most hostile economic conditions experienced since the Great Depression.