Andrew G. Dietderich Brian D. Glueckstein SULLIVAN

4824-9904-2779 v.8

Andrew G. Dietderich

Brian D. Glueckstein

Alexa J. Kranzley

Benjamin S. Beller

SULLIVAN & CROMWELL LLP

125 Broad Street

New York, NY 10004-2498

Telephone: (212) 558-4000

Facsimile: (212) 558-3588

Counsel to the Debtors

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

____________________________________________

In re

GARRETT MOTION INC., et al.,1

Debtors.

____________________________________________

x

:

:

:

:

:

:

:

x

Chapter 11

Case No. 20-12212 (MEW)

Jointly Administered

DECLARATION OF REGINA SAVAGE IN SUPPORT OF (1) DEBTORS’ OBJECTION

TO MOTION OF THE OFFICIAL COMMITTEE OF EQUITY SECURITIES

HOLDERS FOR ENTRY OF AN ORDER TERMINATING THE DEBTORS’

EXCLUSIVE PERIODS TO FILE A CHAPTER 11 PLAN AND SOLICIT

ACCEPTANCES AND (2) DEBTORS’ MOTION FOR AN ORDER (I) AUTHORIZING

THE DEBTORS TO ENTER INTO AND PERFORM UNDER (A) THE PLAN

SUPPORT AGREEMENT AND (B) THE EQUITY BACKSTOP COMMITMENT

AGREEMENT AND (II) GRANTING RELATED RELIEF

I, Regina Savage, hereby declare under penalty of perjury:

1. I am a Managing Director at Morgan Stanley & Co. LLC (“MS&Co”), which has

its principal offices located at 1585 Broadway, New York, New York 10036, and other offices

1 The last four digits of Garrett Motion Inc.’s tax identification number are 3189. Due to the large number of

debtor entities in these Chapter 11 Cases, which are being jointly administered, a complete list of the Debtors

and the last four digits of their federal tax identification numbers is not provided herein. A complete list of such

information may be obtained on the website of the Debtors’ claims and noticing agent at

http://www.kccllc.net/garrettmotion. The Debtors’ corporate headquarters is located at La Pièce 16, Rolle,

Switzerland.

20-12212-mew Doc 876 Filed 02/09/21 Entered 02/09/21 16:03:18 Main Document Pg 1 of 12

¨2¤!6,5") Ec«

2012212210209000000000037

Docket #0876 Date Filed: 02/09/2021

-2- 4824-9904-2779 v.8

located worldwide. I work out of MS&Co’s offices in Chicago, Illinois. I have been one of the

principal personnel working on MS&Co’s engagement with the above-captioned debtors and

debtors in possession (collectively, the “Debtors”).

2. I hereby submit this declaration (this “Declaration”) (i) in support of the Debtors’

Objection to Motion of the Official Committee of Equity Securities Holders for Entry of an Order

Terminating the Debtors’ Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances

filed contemporaneously herewith (the “Exclusivity Termination Objection”)2 and (ii) in further

support of the Debtors’ Motion for an Order (I) Authorizing the Debtors to Enter into and Perform

Under (A) the Plan Support Agreement and (B) the Equity Backstop Commitment Agreement and

(II) Granting Related Relief [D.I. 783] (the “PSA/BCA Motion”). Except as otherwise indicated,

all facts set forth in this Declaration are based upon: (i) my personal knowledge, information and

belief, or my opinion based upon experience, knowledge and information concerning the Debtors;

(ii) information learned from my review of relevant documents; and/or (iii) information supplied

by members of the Debtors’ management, employees of MS&Co or its affiliates working directly

with me or under my supervision, direction or control and/or from the Debtors’ other professionals

and advisors. I am authorized to make this Declaration on behalf of MS&Co. If called upon to

testify, I could and would testify competently to the facts set forth in this Declaration.

Qualifications

3. I am a Managing Director within the Global Industrials Group of MS&Co and I

oversee the global automotive and global mobility technologies verticals. I provide industry-

specific insights and knowledge to the Debtors, general advisory and M&A related services and,

2 Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the

Exclusivity Termination Objection.


-3- 4824-9904-2779 v.8

along with my team, have driven the marketing process for the Debtors’ assets. MS&Co’s

professionals assisting the Debtors include professionals with specialties in M&A, Global

Industrials and restructuring. I have been employed by MS&Co since 2009. Prior to joining

MS&Co, I worked in investment banking at Goldman Sachs. I hold an MBA and Masters in Public

Policy from Georgetown University, and a BA in International Affairs from George Washington

University. I have more than 15 years of investment banking and financial advisory experience.

4. MS&Co is registered as a broker-dealer with the SEC and in all 50 states, the

District of Columbia, Puerto Rico and the U.S. Virgin Islands. MS&Co is the primary U.S.

broker-dealer subsidiary of Morgan Stanley, a global financial services firm that, through its

subsidiaries and affiliates, provides a wide variety of products and services to a large and

diversified group of clients and customers, including corporations, governments, financial

institutions and individuals. Morgan Stanley is a publicly-traded company based in the U.S. and

listed on the New York Stock Exchange, among other stock exchanges. As of September 30, 2020,

Morgan Stanley had 63,051 employees worldwide.

5. MS&Co is one of the world’s leading investment banking and financial advisory

firms, specializing in providing investment banking, capital markets solutions, mergers and

acquisition (“M&A”) and restructuring advisory services to companies throughout many

industries. In particular, MS&Co is a leading investment bank in the automotive industry with

extensive experience in providing financial, capital markets and M&A advisory services to, and in

transactions involving, automotive and automotive suppliers such as the Debtors. MS&Co and its

professionals have a strong reputation in advising automotive companies on a variety of corporate

finance matters. MS&Co has been involved in over 45 announced automotive M&A transactions

globally valued at approximately $84 billion over the five years prior to August 31, 2020. For


-4- 4824-9904-2779 v.8

instance, MS&Co’s M&A professionals are providing or recently have provided financial

advisory, investment banking, and other services for the following auto industry related

companies: Autoliv; Aston Martin; Bosch; Continental; Ford Motor Co.; Geely; General Motors;

Hitachi Automotive Systems; PSA Group; Michelin; Microvast; Mitsubishi Motors; Pirelli;

Romeo Power; REE; and Volvo Cars, among others.

6. MS&Co and its professionals also have extensive experience as advisors in M&A

transactions for a variety of companies in many different industry sectors, including providing

M&A advisory services in 318 completed transactions globally worth over $1 trillion between

May 1, 2019 and June 30, 2020. Euromoney recently named MS&Co the World’s Best Bank for

Advisory in 2020. In the restructuring context, MS&Co has served as a financial advisor to

financially troubled companies providing financial advisory, investment banking, distressed

M&A, capital markets and other services in connection with the following companies both in and

out of court: Alestra, S.A. de R.L; Crown Media Holdings Inc.; CSM Bakery Solutions; Federal

Home Loan Mortgage Corporation; Federal National Mortgage Association; Gawker Media;

General Motors Corp.; GNC Inc.; Indiana Toll Road; Lucid Motors; M&G Corpus Christi;

Residential Capital, LLC; Nystar; Seadrill; Spansion Inc.; SuperMedia Inc.; Telecom Argentina

S.A.; and Transener S.A. as well as numerous other companies in out of court debt for equity

exchanges and other recapitalization transactions.

The Debtors’ Sale Process

7. In late March 2020, the Debtors engaged MS&Co to conduct a strategic review of

the Debtors’ businesses and explore the possibility of a sale of all or substantially all of the

Debtor’s assets or businesses or other transaction, with the goal of maximizing the Debtors’ value.

As part of that process, a targeted number of potential partners, including, but not limited to,


-5- 4824-9904-2779 v.8

potential merger partners and buyers of the Debtors’ assets or businesses, were identified. Due to

heightened liquidity concerns as a result of the COVID-19 pandemic, a downturn in the automotive

industry, and customer concerns about the Debtors’ capital structure, the Debtors accelerated their

strategic review process and launched a formal bidding process. Each of the prospective partners

were instructed to, and expressed the ability to, consider an investment in a variety of forms,

including through minority investments such as a private investment in public equity or preferred

equity transactions, as well as pursuant to a change of control transaction. Consequently, I believe

that the process provided ample opportunity to all parties-in-interest to submit any form of

proposal to purchase the Debtors’ assets or the equity of GMI or otherwise refinance or de-lever

the Debtors’ capital structure. As I testified previously, the prepetition process resulted in the

Debtors’ entry into the Stalking Horse Purchase Agreement.

8. The marketing and sale process for the Debtors’ businesses continued after the

filing of the Chapter 11 Cases. After the filing of these Chapter 11 Cases, Morgan Stanley was in

contact with no less than 28 potential bidders regarding the Debtors’ sale process, in addition to

the Stalking Horse Purchaser.

9. In October, the Initial COH Group Proposal was publicly announced and received

by the Debtors. The Debtors considered the Initial COH Group Proposal and engaged with the

COH Group on its terms. There were many interesting elements of the Initial COH Group

Proposal, including the inclusion of a settlement with Honeywell. The Debtors concluded that the

improved Stalking Horse Purchase Agreement was higher and better than the Initial COH Group

Proposal at that time, but nevertheless continued discussions with the COH Group regarding

potential changes and improvements. At all times, the Debtors and their advisors viewed proposals

from the COH Group as offers to purchase the Debtors in a change-in-control transaction, and


-6- 4824-9904-2779 v.8

evaluated those proposals as such alongside other bids, including those from the Stalking Horse

Purchaser.

10. In October, the Stalking Horse Purchaser improved the consideration being offered

from the $2.1 billion in the Stalking Horse Purchase Agreement to $2.6 billion. Consistent with

the Bid Procedures approved by the Court, the Debtors engaged in discussions with potential

bidders about higher and better offers, and provided sale process updates to all estate professionals,

including advisors to the Equity Committee. Through the sale process, the Debtors welcomed and

considered all proposals and structures, including any new money equity issuances and stand-alone

plans of reorganization.

11. Three parties submitted offers deemed by the Debtors to be Qualified Bids under

the Bid Procedures and were invited to participate in the Auction (as defined in the Bid

Procedures): the Stalking Horse Purchaser’s $2.6 billion transaction, the Initial COH Group

Proposal; and a new equity plan proposal advanced by a consortium of Owl Creek, Warlander and

Jefferies (“OWJ”). All three Qualified Bids involved new money cash investments in risk-

absorbing common stock (the Stalking Horse Purchaser) or preferred stock convertible into

common stock (COH Group and OWJ), each of which resulting in a substantially improved capital

structure. While all three Qualified Bids were change-in-control sale transactions negotiated at

arm’s-length—and not discount rights offerings—the Debtors negotiated such that each provided

as additional consideration a co-investment opportunity for existing stockholders to participate in

the acquisition to some extent on the same pricing terms available to the buyer.

12. While advisors to the Equity Committee participated in discussions regarding the

Qualified Bids, the Equity Committee did not submit a bid or a stand-alone plan proposal pursuant

to the Bid Procedures at any time during the competitive auction process. Instead, the Equity


-7- 4824-9904-2779 v.8

Committee continued to express to the Debtors its preference that common stock not be sold and

that the Debtors instead simply “refinance” by issuing debt and non-convertible fixed income

instruments.

13. The Debtors attempted on multiple occasions to negotiate a “portable” settlement

with Honeywell on terms that could be incorporated into different transactions. The Debtors

viewed a portable Honeywell settlement as maximizing optionality, but were unable to reach

agreement with Honeywell on that basis. Absent an agreement on a significant all cash settlement,

Honeywell cited, among other things, the importance of an acceptable reorganization capital

structure and relationship with the ultimate controlling owner. The Debtors then worked to

negotiate the terms of the settlement reflected in the COH Sale in connection with that transaction.

14. The Auction commenced on December 21, 2020 and continued for multiple rounds

that spanned several weeks, as the Debtors worked between rounds to evaluate complex bids and

try to procure higher and better offers from the bidders. At different times, different bidders had

offered the leading bid at the Auction. With improved bids in hand from the Stalking Horse

Purchaser and OWJ that did not yield a clear highest or otherwise better bid, the Debtors

determined to solicit best and final bids from all participants by January 5, 2021. The Equity

Committee again did not submit a binding written proposal, but engaged in oral discussions with

the Debtors’ advisors about the terms of a potential stand-alone refinancing plan proposal.

15. After consideration of all written bids received, and in consultation with the

Consulting Professionals (as defined in the Bid Procedures), including advisors to the Equity

Committee, on January 8, 2021, the Debtors determined that the final and improved written bid

submitted by the Stalking Horse Purchaser, which increased its total consideration to $2.9 billion,

was the higher and better offer for the Debtors’ businesses, with a second place bid from OWJ of


-8- 4824-9904-2779 v.8

$2.765 billion. Notwithstanding this selection, the Debtors continued to consider a further verbal

proposal made by the COH Group (which, by November 2, 2020, included certain holders of the

Debtors’ prepetition notes), engaging with them and seeking improvements to the terms of the

proposed transaction concurrently with the other bids. The Debtors repeated the request to make

the Honeywell settlement portable during these discussions, but Honeywell, again, declined

emphasizing that its settlement was part of the integrated transactions proposed by the COH Group

and was not independently available. On January 10, 2021, the Debtors’ Board of Directors was

also briefed on the terms being discussed with the Equity Committee and evaluated that

hypothetical proposal as part of its process to determine the highest or otherwise better offer

available to the Debtors.

16. Following continued discussions, the COH Group submitted what was in my view

a materially improved written proposal to the Debtors, in particular including the $6.25 per share

cash buy-out to all electing GMI stockholders and negotiated substantial improvements to the

proposed settlement with Honeywell. In addition to making various substantive changes to their

proposal, the COH Group also agreed to the Debtors’ request that changes be made to the “no

shop” provision in the proposed Plan Support Agreement to allow the Debtors to continue to

provide the Equity Committee’s advisors and potential investment partners access to confidential

information as the Equity Committee continued to consider an alternative proposal, and engage

with them if appropriate.

17. On January 10, 2021, after the robust auction process and multiple GMI Board of

Directors meetings, the Board unanimously determined that the final written proposal from the

COH Group reflecting a sale of the Debtors to the COH Group for total consideration of $3.1


-9- 4824-9904-2779 v.8

billion plus a settlement with Honeywell on acceptable terms (the “COH Sale”) was the higher and

better bid.

18. The Equity Committee surfaced with a written proposal for the first time on January

24, 2021, which was substantively the same as the oral proposal previously discussed and

considered by the Debtors’ Board of Directors. The Equity Committee filed a proposed plan of

reorganization on February 5, 2021, which contains some additional enhancements to the proposal

but in my opinion fails to address numerous concerns of the Debtors and, as of today, still lacks

any commitment letter or term sheet for the funded debt.

The COH Sale

19. In my opinion, the final terms of the COH Sale are vastly superior to the Initial

COH Group Proposal. Specifically, the terms of the COH Sale were improved to include, among

other things:

Offering a cash buy-out to electing GMI stockholders of $6.25 per share, a

30% premium over the share price the day before the COH Sale was

announced;

Increasing the amount of the co-investment rights available to all GMI

stockholders from $100 million to $200 million;

Increasing the upfront cash payment and decreasing the total nominal cash

amount owed by the Debtors to Honeywell for the global settlement of

substantially all of Honeywell’s claims, and allowing for early partial

prepayment of the Honeywell obligation down to $400 million;

Decreasing the dividend on the Series A Convertible Preferred Stock from

12% to 11% (which may be paid in cash or in kind at reorganized GMI’s

option);

Providing that, at reorganized GMI’s option, the paid in kind dividend on

the Series A Convertible Preferred Stock would be convertible into GMI

common stock at a market-based rate instead of $3.50 per share;


-10- 4824-9904-2779 v.8

Providing for an automatic conversion of the Series A Convertible Preferred

Stock into GMI common stock as soon as the amount owed to Honeywell

is reduced below $125 million and other financial metrics are met; and

Granting GMI a right to redeem the Series A Convertible Preferred Stock

after six years from the emergence date.

20. I believe these improvements inure to the benefit of GMI’s stockholders. All

existing stockholders who do not wish to receive new stock in reorganized GMI in exchange for

their current shares now have the option to receive $6.25 per share in exchange for cancellation of

their shares, which I believe is a reasonable price. All existing stockholders who wish to invest in

the reorganized Debtors have the opportunity to exchange their existing stock for new stock and

the opportunity to participate in a rights offering that has doubled in size since the Initial COH

Group Proposal.

21. Critically, the COH Sale includes a global settlement of Honeywell’s claims under

the Plan, which I believe dramatically and favorably changes the Debtors’ liabilities to Honeywell.

It is my view that the final COH Sale reflects extensive and hard-fought negotiations between the

Debtors and the COH Group over many weeks. I believe that its terms are substantially more

favorable to the Debtors than those of the Initial COH Group Proposal.

The Equity Committee Proposal

22. I believe the Equity Committee’s proposal lacks critical elements for execution and

is inferior to the COH Sale. Critically, the Equity Committee does not have a resolution or a path

to resolution with Honeywell. Beyond that, the Equity Committee’s proposed transaction would

leave the reorganized Debtors with significantly more funded debt on their balance sheet, and

would result in a capital structure that is less favorable to stockholders. The proposed capital

structure would likely hurt the Debtors’ ability to achieve financial projections and hamper their

ability to engage in ordinary course transactions without Series A preferred stockholder approval


-11- 4824-9904-2779 v.8

that would be very difficult to obtain. I believe that the terms of the Series A preferred stock under

the Equity Committee’s proposal would restrict the reorganized Debtors’ ability to successfully

operate after emergence. In addition, the Series A preferred stockholders would have an

inappropriate degree of control over GMI through affirmative consent rights over operations.

23. Furthermore, the Equity Committee’s Series A preferred stock also includes

unlimited syndication rights; the ultimate necessary consenting parties would therefore be

unknown at the time of signing, and obtaining 50% approval to modify terms (as required by the

Series A preferred stock) would likely prove very challenging. It is also my view that the Equity

Committee’s Series A preferred stock would chill strategic transactions involving the Debtors,

because it requires mandatory redemption in connection with a “secondary offering” and includes

consent rights over typical actions.

24. The Equity Committee’s Series A preferred stock is also extremely expensive. It

provides for a 12% dividend, requires 3% cash pay after two years, contains significant make-

whole and redemption premiums, and is only partially convertible to reorganized GMI common

stock, thus leaving the reorganized Debtors with a greater amount of Series A preferred stock

necessary to redeem in the future and far fewer options should the reorganized Debtors’

performance stumble or the operating environment deteriorates. The Equity Committee’s Series

A preferred stock also contains broad and highly restrictive covenants; it is not callable for the first

three years and, even then, is callable only at a very high price.

25. The Equity Committee’s cash buy-out offer to GMI stockholders is illusory,

because while it purports to offer $7 per share, it is capped at $225 million—approximately 42%

of the existing stockholders. If the cash-out election exceeds that amount, stockholders will

receive only their pro rata share and the remaining shares reinstated. In reality, the Equity


-12- 4824-9904-2779 v.8

Committee’s proposed plan is offering a buyout only guaranteed to be the equivalent of $2.97 per

share. As a result, the cash-out option is not comparable to and is inferior to the COH Sale offer

of $6.25 per share. Also, the Equity Committee’s proposed plan, as filed, does not indicate the

source of the additional $225 million for the share buy-back offer.

26. Finally, the Equity Committee’s proposed plan is premised on the assumption that

the Debtors have an enterprise value of $3.9 billion. This is more than $800 million more than the

highest bid received in the competitive process and well outside of Morgan Stanley’s estimated

range of total enterprise value of approximately $2.5 to $3.3 billion, as of an assumed effective

date of March 31, 2021.

27. I do not believe that the Debtors would receive any benefit from the Equity

Committee’s continued pursuit of its proposed plan.

Pursuant to 28 U.S.C. § 1746, I certify under penalty of perjury that the foregoing is true

and correct to the best of my knowledge, information, and belief.

Dated: February 9, 2021 Respectfully submitted,

/s/ Regina Savage

Regina Savage


Documents

Andrew G. Dietderich Brian D. Glueckstein SULLIVAN