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Garrett Motion reinforces industry leadership with financial restructuring and sale process

Garrett Motion reinforces industry leadership with financial restructuring and sale process

Garrett Motion Inc. (“Garrett“ or the “Company“) (NYSE: GTX) has announced it has entered into an agreement with KPS Capital Partners, LP (“KPS”) with respect to a potential purchase of its business. In taking this step, Garrett is seeking to reinforce its industry leadership position and strengthen its ability to continue to support customers, suppliers and employees.

Since becoming independent nearly two years ago, Garrett’s teams have worked tirelessly to strengthen the 65-year legacy of automotive innovation by developing differentiated technologies and solutions like the E-Turbo and automotive software and by reinforcing its operational excellence and global customer experience.

Garrett’s fundamentals are strong, but the heavy debt load and liabilities the Company inherited following the spin-off from Honeywell, compounded by the financial strains of COVID-19, have created a significant long-term burden on its business development.

Garrett has agreed to sell its business to KPS, a leading global private equity firm with a demonstrated track record of successfully investing in the automotive and transportation industries and well known to global automotive OEMs. KPS, with approximately $11.5 billion of assets under management, works to advance the strategic position, competitiveness and profitability of its investments to create world-class, industry-leading companies. Garrett believes KPS will provide the strategic and financial support to enable the Company to accelerate the development of cutting-edge technologies and solutions in highly engineered turbocharger, electric-boosting and connected vehicle technologies critical to the automotive industry’s future vehicle development.

In connection with the sale process, Garrett has begun a process in the U.S. to financially restructure through a voluntary Chapter 11 proceeding with support of holders of a majority

of its senior secured debt. Garrett expects to complete this process in early 2021. The Company is seeking incurrence of $250 million of debtor-in-possession financing, arranged by Citigroup. The proceeds of the new financing, which is subject to Court approval and the satisfaction of other conditions precedent to the closing, will supplement cash flow from ongoing operations and bolster the Company’s liquidity position through the sale process.

Olivier Rabiller, President and Chief Executive Officer of Garrett, said, “This proposed transaction will provide a capital structure and institutional support to ensure our long-term viability and set the foundation for the next phase of Garrett’s growth. Our goal is to emerge from this process in early 2021 with a strengthened financial position, new and supportive ownership, and renewed energy and resources, enabling Garrett to continue to provide exceptional service to our customers, be a strong and reliable partner to all our stakeholders, and act as a stable and desirable employer. I look forward to continuing to work with Garrett’s talented team and serving our customers with our advanced technologies.”

Raquel Vargas Palmer, a Managing Partner of KPS said, “We are excited to acquire Garrett, a global automotive technology leader. Garrett is a world-class company and we look forward to working with its leadership team and employees to build on its technological expertise, history of operational excellence and superior customer service. KPS’ demonstrated decades-long track record and history of successfully investing in the automotive industry, which combined with Garrett’s strengths, will position the Company to play a critical role in the transformation of the global automotive industry.”

Throughout the process, Garrett expects to operate without interruption, including providing customers with the same high-quality products and services they expect and continued partnerships with its valued suppliers in the ordinary course of business.
This communication does not describe, and should not be relied upon for any purpose as a description of, the material terms of the Chapter 11 filing and proposed sale transaction.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements including without limitation our statements regarding our our Chapter 11 process. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to those described in our annual report on Form 10-K for the year ended December 31, 2019, as updated by our quarterly report on Form 10-Q for the period ended June 30, 2020, as well as our other filings with the Securities and Exchange Commission, under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.” You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements.