Top Considerations For Accommodation Agreements With Distressed Suppliers

In many cases where a supplier in the automotive industry is in financial distress, its customer(s) will provide support to the supplier through financial and other accommodations, in order to maintain a continued flow of goods to the customer. In these cases, an "accommodation agreement" between a customer (either an OEM or a Tier 1 supplier) and its supplier is based on a promise by the supplier to maintain the production and supply of parts to the customer without interruption, and a corresponding promise by the customer to provide certain financial and other accommodations to help support the supplier. Accommodation agreements provide additional liquidity to distressed suppliers when senior secured lenders lose the appetite to fund, reduce disruption to business, maintain supply to key customers, and increase likelihood of payout to senior secured lenders. This requires negotiating with the distressed supplier's customer base and lender group. Self-preservation