Among the private equity firms who are considering buying U.S. auto parts maker Cooper Standard are Carlyle Group, Cerberus Capital Management and Platinum Equity, several sources told Reuters. However, they said that the deal isn’t a sure thing because of the tough financing markets.
A source said that Cooper Standard has tasked JPMorgan Chase and Lazard Ltd. to explore a sale that it is currently in the second round of the auction, which has not been progressing quickly due to the unstable financing market. Financing is still relatively cheap for companies that have strong credit ratings.
Meanwhile, buyout deals usually require leveraged loans and high-yield bonds. These represent the riskier type of lending that comes with some of the highest interest rates.
It’s typically the first financing to be withdrawn when credit tightens. Wall Street banks are choosier of the financing deals they commit to or they stiffen lending terms. They make buyout deals such as Cooper Standard more expensive for buyers and as a result, their ability to pay is limited.
In May 2010, the company emerged from bankruptcy under the control of several hedge funds, including Silver Point Capital and Oak Hill Advisors. Some insiders told Reuters that the Novi, Mich.-based company, which produces body sealing systems and fluid handling systems for the automotive industry, may be valued at over $1.5 billion.
However, Carlyle has also made a bid for another auto parts supplier TI Automotive, which is Cooper Standard’s rival in the fluid system segment. Sources added that the possibility of a sale was being studied since the early part of the year. [source: Reuters]