American Axle (AXL) Bankruptcy Fears Weighing on Entire Auto Supplier Sector

July 7, 2009 11:14 AM EDT

Shares of American Axle (NYSE: AXL) are continuing lower once again today amid heavy selling pressure that is bringing down the entire auto supplier sector. The stock is currently down 27% to $2.08.

American Axle shares sank nearly 13% yesterday on the back of a JPMorgan report which said that the company could be the next to file for bankruptcy protection. The analyst cited massive dilution and noted three possibilities: covenant extensions, aid from General Motors (OTC: GMGMQ) and the CEO battling to fight off a Chapter 11 filing.

American Axle confirmed one of the analyst's predictions today, announcing that it has signed a new credit agreement which provides a waiver of the financial covenants under its revolving credit facility through July 30. Also, the agreement requires that during the waiver period, American Axle will need to maintain a daily minimum liquidity of $100 million.

Even in light of the news, traders are laser-focused on the very real possibility of a bankruptcy filing and selling the stock today. Notably, since GM announced that a bankruptcy court approved the sale of its assets (yesterday) and Lear announced that it is planning a Chapter 11 bankruptcy (on July 1), shares of American Axle have fallen nearly 50%.

Elsewhere in the sector:

• BorgWarner (NYSE: BWA) down 3.2%
  
• CLARCOR (NYSE: CLC) down 1.9%
  
• TRW Automotive (NYSE: TRW) down 3.1%
  
• ArvinMeritor (NYSE: ARM) down 6.8%
  
• Dana Holding Corp. (NYSE: DAN) down 1.5%
  
• Stoneridge (NYSE: SRI) down 3.7%

Also, shares of GM are down more than 7% today, most recently trading around $0.647.

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Related Entities

• JPMorgan
• Bankruptcy

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