News Release

June 26, 2017

TAKATA CORPORATION

TSE 7312

Notice on Petition for Commencement of Civil Rehabilitation Proceeding, etc.

Takata Corporation (including its group companies where the content so requires "Takata") hereby announces that, at the meeting of its board of directors held on June 26, 2017, it resolved to file a petition for the commencement of civil rehabilitation proceeding, and filed the same with the Tokyo District Court. The petition was heard on the same date, and the Court immediately issued a temporary restraining order, under which repayments are prohibited, and a supervision order. The Court also appointed Mr. Katsuyuki Miyakawa, Attorney-at-Law, as the Supervisor.

Takata's consolidated subsidiaries, Takata Kyushu Corporation ("Takata Kyushu") and Takata Service Corporation ("Takata Service"), simultaneously filed petitions for the commencement of civil rehabilitation proceedings, and Takata's 12 overseas subsidiaries (including TK Holdings Inc., which is Takata's U.S. subsidiary ("TKH")) resolved to file petitions for the commencement of proceedings under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11") on June 25, 2017 (East U.S. time) and, on the same day, filed the petitions with the U.S. Bankruptcy Court of Delaware.

As a result, there is a possibility that Takata's claims against Takata Kyushu, Takata Services and TKH and each of Takata's subsidiaries' claims against Takata may not be collected.

Takata sincerely regrets any inconvenience caused by this petition for the creditors as well as the related parties who have been supporting and cooperating with Takata.

Takata is planning to rebuild its business with the support of Key Safety Systems ("KSS"), recommended by the Steering Committee as the sponsor, and will continue discussions with KSS regarding its support. Going forward, under the supervision of the Tokyo District Court and Mr. Miyakawa, Attorney-at-Law, the Supervisor appointed by the Court, Takata will make its best efforts to rebuild its business.

  1. Background of, and Reasons for, Petition

    The former Takata Corporation ("Former Takata"), a predecessor of Takata, was established as Takata Kojo Corporation in November 1956 in Hikone-shi, Shiga Prefecture.

    Thereafter, its trade name was changed to Takata Corporation, and it commenced the manufacture and sale of airbags in the 1980s. The Former Takata built production and sales bases around the world and developed the market, and resultantly, its airbags gained a large share of the world market. The present Takata Corporation is a company established in January 30, 2004 as Takata Business Planning Corporation, which succeeded to the Former Takata's business related to automotive safety components (such as seat belts and airbags) through a company split on April 1, 2004 and, its name was changed to Takata Corporation on the same date. Takata, as Takata group including its subsidiaries and affiliates, has endeavored to develop the market of automotive safety components, steadily increased its sales, and has become one of the world's leading manufacturers of automotive safety components. In November 2006, Takata's stock was listed on the first section of the Tokyo Stock Exchange.

    However, from around 2007 onward, malfunctions related to inflators (i.e., parts that inflate airbags by generating inflating gas) in airbags Takata had manufactured started to be detected in cases such as where an inflator ruptured and a death accident was caused by metal fragments from the ruptured inflator. Therefore, in and after November 2008, automakers repeatedly implemented recalls of their models of vehicles equipped with airbags manufactured by Takata group in order to investigate the existence and cause of the malfunctions, and they gradually expanded the scope of vehicles for recall. Although Takata Corporation itself is not manufacturing inflators, since Takata is manufacturing airbags with inflators purchased from TKH, Takata's U.S. subsidiary, and selling the airbags to Japanese automakers, the models of vehicles equipped with airbags that Takata manufactured are also being recalled.

    Takata group may become responsible for a certain proportion of the recall expenses that each automaker is required to pay, and if Takata becomes responsible, Takata may be required to incur significant amount of debt, which could cause a credit crunch and a deterioration in its cash flow. Furthermore, TKH agreed to the Consent Order with the National Highway Traffic Safety Administration (NHTSA) in November 2015 regarding the series of recalls relating to airbag products, whereby TKH assumed the obligation to pay a civil penalty of 70 million US dollars. In addition, Takata agreed to enter into a plea agreement with the U.S. Department of Justice ("DOJ") concerning the issues related to the integrity of Takata's reporting to automakers on the inflator performance verification tests, and a 25 million US dollar (equivalent to approximately 2.9 billion yen) fine was imposed on Takata under such plea agreement. In addition, Takata assumed an obligation to contribute 125 million US dollars to the restitution fund to compensate for damages to the victims of malfunctioning inflators manufactured by Takata group, and assumed an obligation to contribute 850 million US dollars (equivalent to approximately 97.8 billion yen) to compensate for the damage that each automaker incurred. Furthermore, in connection

    with the aforementioned malfunctioning airbags that Takata manufactured, many lawsuits claiming remedies such as compensation for damages have been filed against Takata, and depending on the outcome of these lawsuits, Takata may assume additional obligations.

    In order to respond to the financial and operational issues concerning the above airbag inflator, Takata established a Steering Committee in February 2016 for the purpose of formulating a comprehensive restructuring plan for Takata. Based on the view that seeking an out-of-court restructuring would contribute to the stable supply of Takata's products, the said Committee exchanged views on broad subjects with the stakeholders, including major creditors, and engaged in activities toward formulating a restructuring plan, including sponsor selection process, while adjusting various interests. During the course of the sponsor selection process, the Steering Committee retained a financial adviser and contacted business companies and funds globally. As a result, considering, among others, the amount of financial support and stability of the proceeding, the Steering Committee recommended KSS as the potential sponsor for Takata.

    However, despite multiple discussions with stakeholders, including major creditors, and potential sponsors, Takata was unable to reach an agreement for an out-of-court restructuring plan and, therefore, if Takata was to leave the circumstance as they are and continue the business by itself, Takata would face a cash shortage soon. Moreover, if this cash shortage were to materialize, the stable supply of Takata's products would be threatened, its corporate value would significantly fall, and there would be no way to be supported by any sponsorship or aim to rebuild its business by cooperating with various automakers and financial institutions, etc., and the people concerned, such as the creditors, would be further inconvenienced. Under such background, today, Takata was advised by the Steering Committee that it was reasonable for Takata to adopt, as its restructuring scheme, civil rehabilitation proceedings in Japan and Chapter 11 proceedings in the U.S. Therefore, in consideration of the above advice from the Steering Committee, Takata resolved to file petitions for the commencement of civil rehabilitation proceedings and entered into an agreement in principle with KSS regarding sale of substantially all of its assets, with the aim of rebuilding its business under the civil rehabilitation proceedings through accommodation from major automotive makers and DIP financing from financial institutions.

    Both Takata Kyushu and Takata Services are wholly-owned subsidiaries of Takata. While they collect substantial amount of accounts due from Takata every month in connection with their business, payments will cease as a result of Takata's filing of the petition for the commencement of civil rehabilitation proceeding. If they continue their business as it stands, their cash shortage will be inevitable. Therefore, it was decided to file petitions for the commencement of civil rehabilitation proceedings for Takata Kyushu and Takata Service as well, with the aim of rebuilding their businesses under the civil

    rehabilitation proceedings.

    In addition, 12 overseas subsidiaries, including TKH, also incurred a large amount of indemnification and/or damages claim and credit deterioration due to the occurrence, etc. of death accidents caused by malfunctions related to the inflators above. Under such circumstances, it was decided that such 12 overseas subsidiaries, including TKH, would also pursue business reorganization through the Chapter 11 proceedings by receiving the assistance of KSS.

    Please refer to the "TAKATA CORPORATION AND KEY SAFETY SYSTEMS REACH AGREEMENT IN PRINCIPLE REGARDING SALE OF SUBSTANTIALLY ALL OF

    TAKATA'S ASSETS" dated today with respect to the details of the agreement in principle with KSS.

  2. Aggregate Amounts of Indebtedness (as of March 31, 2017)

    Takata Corporation: Approximately 182,633 million yen

    Takata Kyushu K.K.: Approximately 5,507 million yen Takata Service Corporation: Approximately 194 million yen

    TK Holdings Inc.: Approximately 1,642,589,908 US dollars

    Takata Americas: Approximately 0 US dollars

    TK Finance, LLC: Approximately 14,516 US dollars

    TK China, LLC: Approximately 3,508,034 US dollars Takata Protection Systems Inc.: Approximately 67,267 US dollars Interiors in Flight Inc.: Approximately 2,954,190 US dollars

    TK Mexico Inc.: Approximately 918,064 US dollars

    TK Mexico LLC: Approximately 29,970 US dollars

    TK Holdings de Mexico S. de R.L. de C.V.: Approximately 28,725,708 US dollars Industrias Irvin de Mexico, S.A. de C.V.: Approximately 678,059 US dollars Takata de Mexico, S.A. de C.V.: Approximately 18,490,657 US dollars Strosshe-Mex, S. de R.L. de C.V.: Approximately 41,636,954 US dollars

    (In the future, the foregoing aggregate amounts of indebtedness are likely to increase during rehabilitation proceedings.)

  3. Valuations of Subsidiaries Stock

The book values of the shares of Takata Kyushu and Takata Service held by Takata are 70 million yen and 40 million yen, respectively, as of March 31, 2017. In addition, the book values of the shares of TKH and Takata Americas held by Takata are 1 yen and 15,896,811,600 yen, respectively, as of March 31, 2017. Takata holds the shares of the other overseas affiliates indirectly through TKH or Takata Americas.

Takata Corporation published this content on 26 June 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 27 June 2017 07:14:09 UTC.

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