TAKATA CORPORATION AND KEY SAFETY SYSTEMS REACH AGREEMENT IN PRINCIPLE REGARDING
SALE OF TAKATA
TO IMPLEMENT SALE AND ADDRESS COSTS AND LIABILITIES RELATED TO AIRBAG INFLATOR
RECALLS, TAKATA CORPORATION AND CERTAIN JAPANESE SUBSIDIARIES COMMENCE
PROCEEDINGS UNDER CIVIL REHABILITATION ACT IN JAPAN, AND TK HOLDINGS, INC. AND CERTAIN
NORTH AMERICAN AFFILIATES AND SUBSIDIARIES FILE FOR CHAPTER 11 IN U.S.
There are no insolvency proceedings planned for Europe. The proceedings in the US and in Japan have no
substantial negative effects for Takata in Europe.
Company Working with Customer Group Composed of 14 Automotive Vehicle Manufacturers to Provide Takata
Corporation and TK Holdings with Substantial Accommodations and Liquidity Enhancements to Finance
Restructuring
Global Operations and Customer Shipments Expected to Continue Without Interruption
and Company Will Continue to Produce Replacement Kits for Recalled Vehicles
Proceeds from Sale Will Be Used to Meet Requirements of Plea Agreement with U.S. Department of Justice, to
Satisfy Administrative Costs and Expenses of the Restructuring, and to Fund Unsecured Creditor Recoveries
Tokyo and Sterling Heights, MI – June 26, 2017 – Takata Corporation („Takata,” „TKJP” or the „Company”), a
leading global supplier of automotive safety systems such as seat belts, airbags and child seats, and Key Safety
Systems („KSS”), a global leader in mobility safety, headquartered in Sterling Heights, Michigan, USA,
announced today that they have reached an agreement in principle to sponsor a restructuring plan for the sale
of substantially all of Takata’s global assets and operations to KSS for an aggregate purchase price of
approximately ¥175 billion (€1.4044 billion), subject to certain adjustments at closing.
Under the agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and
operations that relate to the Company’s manufacturing and sale of phase-stabilized ammonium nitrate (PSAN)
airbag inflators (collectively, the „PSAN Assets”). It is expected that Takata’s PSAN-related operations will be
run by a reorganized Takata following the transaction closing and eventually will be wound down. Takata
expects to continue to meet demand for airbag inflator replacements without interruption.
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By combining substantially all of Takata with KSS, the transaction would form a leading global safety-supply
auto parts company with approximately 60,000 employeesin 23 countries focused on serving customers and
providing superior products and innovation in the rapidly evolving auto safety industry.
Jason Luo, President & CEO of KSS, said: „Takata has deep management talent, a dedicated work force and a
long history of exceptional customer service. Although Takatahas been impacted by the global airbag recall,
the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat
belts and other safety products has not diminished. We look forward to finalizing definitive agreementswith
Takata in the coming weeks, completing the transaction and serving both our new and long-standing
customers while investing in the next phase of growth for the new KSS.”
Shigehisa Takada, Chairman & CEO of Takata, said: „KSS is the ideal sponsor as we address the costs related to
airbag inflator recalls, and an optimal partner to the Company’s customers, suppliers and employees. The
combined business would be well positioned for long-term success in the global automotive industry.
Throughout this process, our top priorities have been providing a steady supply of productsto our valued
customers, including replacement parts for recalls, and a stable home for our exceptional employees. This
agreement would allow that to continue.”
The proposed structure for the potential transaction is intended to minimize supply chain disruption concerns
for Takata’s OEM customers. The companies anticipate a quick and seamless integration, utilizing the
combined strengths of their respective management teamsto implement a smooth transition.
KSS will continue to support Takata’s customers, suppliers and employees and embrace and honor Takata’s
Japanese heritage:
KSS plans to retain substantially all of Takata’s employees across the world on comparable employment
terms as currently provided.
KSS has held in-depth discussions with Takata’s major OEM customers and has jointly developed a
transaction structure and operating plan to facilitate ongoing supply of Takata parts. This should provide
continuity of supply to Takata’s customers and confidence to Takata’s employees, suppliers and other key
stakeholders.
KSS plansto continue to support and utilize Takata’s presence in Japan, and does not intend to shut down
any of Takata’s manufacturing facilities there. Furthermore, KSS intendsto establish an Asia regional
headquarters in Tokyo, which should create new jobs in Japan, and plans to retain Takata’s existing non-
PSAN supplier contracts to maintain an uninterrupted supply chain. KSS also intends to invest in many of
Takata’s other worldwide manufacturing facilities and technology and R&D centers.
KSS has substantially completed its due diligence, and Takata and KSS are working toward finalizing a definitive
agreement in the coming weeks, with an expected transaction close in the first quarter of 2018.
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Hideaki Sudo, Chairman of Takata’s Steering Committee and Partner at Tokyo Fuji Law office, said, „Since
February 2016, the Steering Committee has been working diligently, with assistance from our financial and
legal advisors, to develop a path forward for Takata that resolves the recall costs and liabilities on a consensual
basis in partnership with Takata’s automotive customers. After a rigorous
global process, the Committee has recommended KSS as the best sponsor candidate based on a variety of
factors including strategic fit, valuation, and certainty of closing. We are pleased that Takata has accepted such
recommendation. We appreciate the cooperation of the affected automotive manufacturers, who have
worked closely with us to devise this restructuring plan, which we firmly believe is in the best interests of the
Company and its stakeholders.”
Civil Rehabilitationand Chapter 11 Proceedingsin Japan and the US
Excluding recall related costs and liabilities, Takata has continued to produce healthy profits and cash flows
from its existing businesses. Nevertheless, Takatahas determined that it is in the best interests of the
Company and its stakeholders to address the recall related issues in conjunction with the proposed sale.
Accordingly, with the expected support of a group of its OEM customers representing more than 80 % of
Takata’s annual sales (the „Customer Group”) and KSS as plan sponsor, TKJP and its Japanese subsidiaries have
commenced proceedings under the Civil Rehabilitation Act in Japan in the Tokyo District Court (the „Tokyo
Court”). In addition, TKJP’s main U.S. subsidiary, TK Holdings, Inc. („TKH”), and certain of its North America
affiliates and subsidiaries, filed for Chapter 11 in the United States Bankruptcy Court for the District of
Delaware (the „Delaware Court”).
The Japanese OEMs have committed to provide Takata with valuable accommodations and liquidity
enhancements during the Civil Rehabilitation and the Company is working with the Customer Group on an
agreement to do so on a global basis. Takata intends to use the Civil Rehabilitation Act and Chapter 11
processes to continue to work with its Customer Group and KSS to finalize and execute restructuring support
agreements(each an „RSA”) that would include comprehensive terms of the restructuring. The RSAs will
reflectthe commitment of the Customer Group and KSS to the restructuring transactions to be effectuated
pursuant to the Chapter 11 Plan of Reorganization (the „Plan”) that would be subject to approval of the
Delaware Court, as well as the business transfer to be implemented by the Tokyo Court. The transaction with
KSS would also be subject to approval by the Tokyo Court and the Delaware Court, as well as a number of
other conditions, including regulatory and other third-party approvals.
It is contemplated that upon the anticipated effective date of the Plan, Takata’s global PSAN Assets will be
transferred to TKH or one of its subsidiaries, as reorganized under the Plan („RTK” or „Reorganized Takata”),
and all of the PSAN Assets, including PSAN contracts, will be transferred to RTK. It is expected that RTK will
emerge from the Chapter 11 process and operate independently from KSS under the supervision of a Plan
administrator and oversight board. RTK will continue to manufacture PSAN airbag inflators for recalls and the
ongoing production needs of Takata’s customers.
It is expected that the proceedings underthe Civil Rehabilitation Act in Japan and Chapter 11 process in the
U.S. will be completed in the first quarter of 2018.
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No Insolvency in EMEA Region
The Takata Group is divided into legally independent regions: Japan, Asia, Americas and EMEA. While the costs
and liabilities related to airbag inflator recalls have mainly affected the businesses in Japan and the US, the
other businesses continued to produce healthy profits and cash flows. In particular, Takata EMEA (Europe,
Middle East and Africa) continues to have a solid financial basis and stands on a strong foundation with good
and supporting customer relationships. Takata EMEA is operating fully independent and its business does not
depend on financial support from other Takata regions. Takata’s affiliates in EMEA, their business partners and
employees should, therefore, not be directly negativelyaffected by the proceedings in the U.S. and Japan, or
the proposed sale. It is not intended to initiate insolvency proceedings in Europe.
Proceeds of Sale to Be Used to Address PSAN Related Costs and Liabilities and Capitalize RTK
As contemplated and as expected to be detailed in the Plan, Takata intends to use the Civil Rehabilitation and
Chapter 11 processes to address the costs and liabilities related to airbag inflator recalls, including to fund its
remaining obligations under the terms of the plea agreement with the U.S. Department of Justice („DOJ”) that
was announced on January 13, 2017 („the DOJ Plea Agreement”) and Consent Orders entered into by Takata
with the National Highway Traffic Safety Administration („NHTSA”).
Pursuant to the DOJ Plea Agreement, Takata paid $25 million as a fine to the DOJ and was required to fund two
restitution funds: (1) a fund of $125 million to meet liabilities to current or future personal injury claimants and
(2) a fund of $850 million to satisfy a portion of the claims of OEM customers who purchased airbags
containing PSAN inflators. Each of the restitution funds will be administered by a special master in accordance
with the DOJ Plea Agreement. The $125 million fund for personal injury claimants was funded on March 29,
2017. Consistent with the DOJ Plea Agreement, the agreements in principle with the Customer Group and the
proposed restructuring terms provide for the proceeds of the sale to KSS to be used to fund the $850 million
OEM restitution fund.
After setting aside sufficient funds to capitalize RTK following completion of the Chapter 11 process, any
remaining sale proceeds after satisfaction of the foregoing obligations and the payment of other claims
entitled to priority or payment in full would be used to fund recoveries to holders of general unsecured claims.
Mr. Takada said, „We believe taking these actions in Japan and the U.S. is the best way to address the ongoing
costs and liabilities of the airbag inflator issues with certainty and in an organized manner while ensuring that
Takata’s operations worldwide continue in the ordinary course and without interruption. During the Civil
Rehabilitation proceedings and Chapter 11 process and beyond, Takata remains fully committed to supporting
all actions that advance vehicle safety. We deeply regretthe circumstances that have led to this situation, but
we are grateful to have reached a resolution that will allow us to continue to promote the safety of the driving
public.”
The commencement of Civil Rehabilitation proceedingsin Japan and the Chapter 11 filing in the U.S. should
have no effect on the ability of drivers to get replacements for recalled Takata airbag inflators free of charge.
Vehicle ownersin the U.S. should continue to visit https://www.airbagrecall.com/for more information on
airbag inflator replacements.
Debtor-in-Possession (DIP) Financing and Customer Accommodations
TKJP has obtained a commitment for up to a ¥ 25 billion (Euro 201 million) revolving credit facility debtor-in-
possession („DIP”) financing to be provided by Sumitomo Mitsui Banking Corporation.
Additionally, the Japanese OEMs have committed to provide Takata with valuable accommodations and
liquidity enhancements during the Civil Rehabilitation and the Company is working with the Customer Group
on an agreement to do so on a global basis.Upon approval by the supervisor appointed by the Tokyo Court
and approval by the Delaware Court, the DIP financing in Japan and the accommodations and additional
liquidity support from the Customer Group in both Japan and the U.S., along with Takata’s cash flow from
operations, are expected to provide Takata with sufficient liquidity to continue to operate its business and
serve automotive customers globally in the ordinary course and without any significant disruptions.
Uninterrupted Global Operations – Strong EMEA Business
Shigehisa Takada, said „We are committed to ensuring that the restructuring process has as little impact as
possible on our employees, customers and suppliers across the world, as well as on drivers whose safety is
always our primary focus.”
The Company has requested Court approval in the U.S. to continue to pay its employees without interruption
and in the same manner as before the filing and expects the request to be granted as part of the Court’s „first
day” orders. Also, under the Civil Rehabilitation Act, the salaries of the Company’s employees will be
statutorily protected. As a result, the Company’s salaried and hourly employees should continue to be paid on
the normal schedule. Additionally, there are expected to be no changes to various employee benefit programs.
Also for the employees in the EMEA region no changes will appear.
With the additional liquidity to be provided by the DIP financing in Japan and the accommodations and other
liquidity enhancements to be provided globally by the Customer Group, the Company’s suppliers can be
assured that Takata has the ability to pay its post-petition obligations on a timely basis and intends to do so as
required under the Civil Rehabilitation Act and the U.S. Bankruptcy Code, which grants priority status to goods
and services received after the Civil Rehabilitation and Chapter 11 filing date.
Takata EMEA continues to have a solid financial basis and is not dependent on financial support from other
regions. The order income in the EMEA region is consistently high. Also in Europe, Takata will continue to pay
its suppliers and employees without change or interruption and will continue to reliably deliver products to
customers as usual.
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Mr. Takada added, „I would like to thank all of our constituents for their continued support during this process.
In particular, I and the rest of our management team recognize that the Company’ssuccess is dependent upon
our talented and dedicated employees, and we are grateful for their hard work and loyalty. We are taking
these actions to ensure that Takata remains a stable and financially secure employer for thousands of workers
across the world.”
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About Takata
Takata Corporation is a leading global innovator and supplier of automotive safety systems, including airbag
systems, seat belts, steering wheels, electronics, sensors, and child restraint systems, and supplies all major
automotive manufacturers in the world. Headquartered in Tokyo, Japan, it operates 56 plants in 20 countries
with approximately 46,000 global employees worldwide.
About Key Safety Systems
Key Safety Systems (KSS) is a global leader in mobility safety through the system integration and performance
of safety-critical components to the automotive and non-automotive markets serving the active safety, passive
safety and specialty product sectors. Through highly specialized design, development, and manufacturing, KSS’
technology is featured in more than 300 vehicle models produced by over 60 well-diversified customers
worldwide. Since commencing business as a United States start-up, serving Detroit automakers in 1916, KSS
continues today with an entrepreneurial and pioneering spirit. KSS is headquartered in Sterling Heights,
Michigan, with a global network of more than 13,000 employees in 32 sales, engineering, and manufacturing
facilities. The company has 5 main technical centers located in the key regions of the Americas, Europe and
Asia. It is a wholly owned subsidiary of Ningbo Joyson Electronic Corp. (SHA: 600699) („Joyson Electronics”).
