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Takata bidders said to favor Japan bankruptcy; shares tumble

Bloomberg

Bidders for troubled air bag maker Takata Corp. are leaning toward a court-mediated bankruptcy in Japan to shield them from liabilities, according to people familiar with the matter.

The company had opposed the move on concern it would disrupt the supply of replacement parts.

Takata, which is seeking a sponsor after triggering the biggest safety recall in automotive history, may name the buyer in February or March, according to the people, who asked not to be identified as the discussions are private.

The recall is expected to cover more than 100 million air bags. The faulty products have been linked to at least 17 deaths worldwide.

Takata is still in discussions about its turnaround plan and no decision has been made on bankruptcy proceedings, the company said in response to a stock exchange query.

The company’s shares tumbled 17 percent to ¥717 at the close of trading on Thursday, after being suspended for the morning session. The stock has swung by close to the daily limit on six days in the past three weeks as investors speculated on the company’s progress in securing a financial backer and settlement.

Due diligence by bidders including Autoliv Inc. and Key Safety Systems Inc. had to be extended in part because of the difficulty in calculating the potential liabilities, people with knowledge of the talks said last month.

The eventual buyer would have to ensure a stable supply of replacement parts even as uncertainties surround its exposure to future liabilities, including the costs for replacing the air bags.

A representative for Key Safety Systems declined to comment. Calls to Autoliv outside of regular business hours weren’t answered.

Takata last week admitted to hiding the deadly risks of its air bags for about 15 years and agreed to plead guilty in the U.S. to one criminal charge as part of a $1 billion settlement, according to court papers. Three former Takata executives were separately indicted for their alleged roles in the cover-up.

Takata Chief Financial Officer Yoichiro Nomura said in November a court-mandated restructuring could disrupt the supply of parts to automakers, while a court-led bankruptcy will make it easier for Takata’s financial adviser Lazard Ltd. to find a buyer.

The $1 billion it agreed to pay in the U.S. settlement includes $25 million to the authorities and $975 million to compensate carmakers and people who were injured, according to court papers. While the criminal fine is due within a month, the company doesn’t have to pay the restitution until it’s sold because it can’t afford to pay now.