Motherson's Marelli takeover faces US hedge fund bump
is bracing for battle with US distressed debt hedge fund
Strategic Value Partners
(SVP) over the acquisition of
Marelli Holdings
, a Japanese car parts supplier owned by private equity group KKR & Co, said people aware of the matter. The Vivek Chaand Sehgal-led Indian company is said to be raising a $2 billion war chest for the deal.
The board of cash-strapped Marelli, together with a special committee of its warring lenders, are meeting this week, possibly within 24 hours, to decide on the future of the company that's on the verge of bankruptcy.
SVP is an existing lender of Marelli, while Motherson Group has set up 50:50 joint ventures with the company in India since 2008, for components such as automotive lighting and shock absorbers.
Marelli began in 2019 after Japanese auto component maker Calsonic Kansei, a KKR portfolio company, acquired Italian business Magneti Marelli. Calsonic Kansei had been loaded with 1.1 trillion yen in debt and about 700 billion yen of that was used to finance the purchase.
The company underwent debt restructuring in 2022, with haircuts close to 40per cent , after revenue plummeted during the pandemic.
KKR then wrote off close to $2 billion and injected a further $650 million that helped the company to turn the bend in the short term with improved operating income in 2024 over 2023.
It's unlikely to infuse more equity into the business, said the people cited.
DIP Financing
Motherson, India's largest auto component maker, has been in discussions with global banks including HSBC and Barclays to arrange the money under a special financial framework called 'debtor in possession' or DIP financing, applicable for bankrupt companies in the US, said the people mentioned above.
A DIP is a business or an individual that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim under a lien or other security interest. A DIP may also continue to do business using those assets.
If successful, this will be Motherson's largest buyout. However, any offer will need the approval of a majority of Marelli's lenders.
Lender vs Lender
There are two consortiums of lenders in Marelli, each holding about 50per cent of the debt. One is Japanese, led by Mizuho and including the Japan Bank for International Cooperation. The international consortium is led by SVP, New York private equity group Fortress Investment, MBK Partners and Deutsche Bank. SVP holds 29per cent , giving it significant influence over decisions.
The lenders are rolling over on a month-by-month basis nearly $122.4 million (18 billion yen) of debt due for repayment, according to the people cited. The company's total debt outstanding is $4.4-4.5 billion. Gross revenue stood at $11.6 billion (10.7 billion euros). In comparison, Motherson Group's gross revenue was $25.7 billion in FY25.
Since late last year, the SVP consortium has been proposing packages that involve infusing fresh capital, including an equity injection of around $690 million (100 billion yen). But these came with the caveat that new loans and old borrowings from those participating in the round would be made senior to other debt under a special mechanism called 'up-tiering.' Such rejigs are common in distressed situations in the US and Europe, but not in Japan. Thus, Mizuho and the other Japanese creditors have been opposed to it.
Motherson's Counter
To break the deadlock, Marelli had approached several suitors, including Motherson Group, late in 2024, said the people mentioned above. A fortnight ago, Motherson submitted an alternative financial package to revive Marelli, which has been hit by a drop in demand from key customers such as Nissan and Stellantis. The former is believed to account for nearly 30per cent of Marelli's business.
Under the proposal, KKR will write off 100per cent of its shareholding in Marelli and transfer its shares to Motherson. The Indian company would also purchase new Marelli shares for around $700 million. Additionally, existing lenders would sell debt worth $4.4 billion at 20per cent of value. Emergency financing of $345 million extended by a few Japanese banks to Marelli would be acquired at face value. The package also included new equity funding of $1.94 billion.
After the capital infusion, Motherson would become the seniormost lender under the DIP mechanism. In the event of a liquidation, under US bankruptcy guidelines, Motherson would get the entire sum back. If the value realised is more than the amount Motherson deployed, then the Indian company would be the first to get paid in full, with interest. Any residual amount would be distributed among the others. Similarly, if the company voluntarily opted for Chapter 11, Motherson also would get an opportunity to bid. In the event it's outbid, the company will get its money back.
'The company evaluates various strategic opportunities globally for its growth and expansion of its business,' a Samvardhana Motherson International spokesperson said. 'At this stage, there is no material event that requires disclosure.'
The lenders had to firm up their decision by this weekend, said some of the existing stakeholders of the company. There is a mandatory window of at least 10 business days to consider such rehabilitation plans.
According to people directly involved, the Japanese banks and the company have been supportive of the Motherson package, but the deadlock among lenders continues as the SVP-backed group wasn't keen. One of the sources said at least 7-8 OEMs that source parts from Marelli, including
Volkswagen
, Honda, Stellantis Daimler, GM, Nissan etc. have also voiced support for Motherson proposal due to the synergies involved. This could not be independently verified.
A Marelli spokesperson declined to respond to specific queries.
'We remain focused on executing our strategy and delivering on our commitments,' the company said. 'Marelli is in active discussions with lenders to secure additional financing to address a temporary working capital gap. We continue to operate as normal while these discussions are ongoing. We remain confident in our ability to reach an outcome that ensures Marelli continues delivering the best advanced solutions for its customers.'
Mails to Mizuho, SVP did not get a response till press time Monday.
SVP Bounces Back
People in the know said SVP consortium has further sweetened its offer in the last few days, featuring much higher equity capital infusion. Details are sketchy, but they said some key Japanese lenders may support this.
Even so, the company is expected to voluntarily file for Chapter 11 to restructure its long-term liabilities while continuing the business. In such an eventuality, Motherson will get a 45-50 day window to revise its offer within the 'overbid period,' during which potential buyers can submit higher offers than the initial 'stalking horse' or preliminary bid. The company is planning to do so, said people working with the New Delhi-headquartered group.
'If the board, lenders agree to go with the SVP offer, Motherson will pause its fund raising and come up with an improved offer instead,' said one of the persons cited. 'It is confident that compared to a hedge fund, it has a better prospect to acquire and run a company as vast and complex as Marelli… It has been in the market for sale for a long time but has not found any takers. Additionally, the business synergies are very strong and has a track record of being a turnaround specialist world over.'
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With much of the West shunning Russian crude following the country's February 2022 invasion of Ukraine, Russia began offering discounts on its oil to willing buyers. Indian refiners were quick to avail the opportunity, leading to Russia — earlier a peripheral supplier of oil to India — emerging as India's biggest source of crude, displacing the traditional West Asian suppliers. While the discounts have varied over time, Russian oil flows to India largely remained robust despite Western pressure and limited sanctions on Russia's oil trading ecosystem. But the appears to be changing now, and fast. 'On one side, the EU's (European Union's) sanctions — effective from January 2026 — ban imports of refined products derived from Russian-origin crude, forcing Indian refiners to segment crude intake and product flows. On the other hand, the US tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India's Russian oil trade. Together, these measures sharply curtail India's crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty…(it) represents a double whammy for Indian refiners,' said Sumit Ritloia, Lead Research Analyst, Refining & Modeling at Kpler. Before this week's tariff announcement by Trump mentioning a 'penalty' on India, India's significant Russian oil imports were being subjected to a more aggressive stance by Western powers for a few weeks. 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He added that India in recent years has expanded its crude sourcing slate from 27 countries to around 40 countries, and enough oil was available globally for India to buy and ensure energy security. If India indeed decides to shift away from Russian crude, industry insiders and experts expect New Delhi to negotiate a potential wind-down period for reducing supplies, as replacing the massive volumes of Russian oil supply overnight is impossible, according to industry insiders. It would take at least three-four months to substantially cut down on imports and shift to other suppliers — mainly in West Asia, but also in Africa, and even the US and Latin America. Loss of discounted Russian barrels would certainly push up the relative cost of imports by a few dollars a barrel, which in turn would inflate India's oil import bill by billions of dollars on an annualised basis. Additionally, if global oil prices rise in the eventuality of most of Russian oil going off the market, the hit for India would be amplified further. 'Replacing Russian crude isn't plug-and-play…it is no easy feat—logistically daunting, economically painful, and geopolitically fraught. Supply substitution may be feasible on paper, but it remains fraught in practice. Gulf barrels come with pricing rigidity, African grades add freight volatility, and Latin American flows face availability constraints,' said Ritolia. India's traditional crude suppliers in West Asia — chiefly Iraq, Saudi Arabia, and the UAE — would be the logical fall-back, but Indian refiners will have to grapple with significant constraints as they reduce Russian oil imports. A lot of the crude from West Asia comes through term contracts, unlike spot purchases of Russian crude, which may force Indian refiners to commit to higher annual offtake of West Asian oil, which is more rigidly priced compared to discounted Russian crude. Also, a number of Indian refineries that had gotten attuned to processing Russian crude in large volumes may see an impact on their product yield and refinery configurations due to crude quality mismatch. India is also expected to sustain its ongoing efforts to diversify its sources of crude oil. Geopolitical shifts, freight economics, and refinery economics are expected to continue shaping India's crude sourcing decisions and diversification strategy. Sukalp Sharma is a Senior Assistant Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 13 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. He considers himself an above-average photographer, which goes well with his love for travel. ... Read More
