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Visteon Corporation (NYSE:VC)

Tender Offer to Acquire Remaining Public Shares of Korean Affiliate Halla Climate Control Corp Conference Call

July 5, 2012 10:00 am ET

Executives

Scott Deitz – Investor Relations

Donald J. Stebbins – Chairman, President and Chief Executive Officer

Martin E. Welch III – Executive Vice President and Chief Financial Officer

Analysts

Matthew Stover – Guggenheim Securities LLC

Douglas Carlson – Bank of America/Merrill Lynch

Patrick Bartels – Monarch

Dean Machado – LionEye Capital Management LLC

Harpreet Anand – Oak Hill Advisors, L.P.

Kirk Ludtke – CRT Capital Group

Matthew Stover – Guggenheim Securities LLC

John Murphy – Bank of America/Merrill Lynch

Brian Johnson – Barclays Capital, Inc.

Arthur Kaz – Pentwater Capital

Joseph von Meister – Bennett Management

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Barry Konig – Cumberland Associates LLC

Douglas Carson – Bank of America Merrill/Lynch

Operator

Good morning. And welcome to Visteon Investor Call. All lines have been placed on a listen-only mode to prevent background noise. As a reminder, this conference call is being recorded.

Before we begin this morning’s conference call, I’d like to remind you this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the slide entitled Forward-looking Information for further information.

Presentation materials for today’s call were posted on the company’s website this morning. Please visit www.visteon.com/earnings to download the material if you have not already done so.

I would now like to introduce your host for today’s conference call, Mr. Scott Deitz, representing Investor Relations for Visteon Corporation. Mr. Deitz, you may begin.

Scott Deitz

Thank you, Rachel. Good morning and good evening to everyone who is joining us today. As we speak, we are in Seoul, South Korea, where it is 11 PM, Thursday evening, July 5. The Visteon team has been here to complete details associated with the transaction that we are discussing today, that is the acquisition of the remaining 30% interest in Halla Climate Control. We will also briefly discuss our decision to terminate the non-binding agreement regarding our global interiors businesses.

With us, to provide insight to the transaction are, Visteon’s Chairman of the Board and CEO, Don Stebbins, and the company’s CFO, Marty Welch. After Don's opening remarks and his review of the slide deck, you will have an opportunity to ask questions. Please limit yourselves to two if you can, so that we can get everyone in the question queue. We will start our discussion on slide 2, with that, I now turn it over to Visteon's Don Stebbins, Don?

Donald J. Stebbins

Thanks, Scott and good morning everyone. Let me first start with a disappointing news and then move on to the good news. This morning Korea time, we announced that we terminated the Memorandum of Understanding with HASCO, regarding the sale of our interiors business to Yanfeng Visteon. This decision was based on our discussion this week and was based in large part on the uncertainty around European auto production and the future of the Eurozone economies, where about two-thirds of our interiors business resides.

Moving forward, we’ll continue to provide our customers with high quality parts and innovative ideas, while we continue to explore strategic options for our interiors business.

Now on to the good news. As Scott mentioned, we’re joining you today from Seoul having completed all the necessary work to launch the tender offer process to acquire the 30% of Halla Climate Control that we do not own. The tender launched this morning in Seoul. We’ve been working on this offer for many months and are pleased to have reached this point. We are moving forward to complete the transaction, which is structured in a right way to create value for our customers and our shareholders.

Slide 2, simply outlines the terms of the tender offer transaction as an all-cash deal valued at $745 million net of acquired cash. Importantly, as presented the deal was estimated to be accretive to pro forma 2011 earnings per share by about $0.27, not including any synergies. Our relationship with Halla began about 13 years ago and bringing our two organizations together makes absolute sense, as we continue to build a valuable world-class global automotive climate business.

Now let’s move onto slide 3. Action is rather straightforward as noted on this slide. We believe that purchase price as offered is an extremely fair and reasonable one, consistent with an appropriate premium to Halla’s recent market value. The tender period will last 20 days and we’ve determined that we will only complete this tender offer, if we achieve a minimum threshold of 95% of the total shares outstanding.

Under Korean law, reaching this point allows us to complete the transaction to the 100% level during the coming months with a squeeze out process. The de-listing process will occur in parallel. The bridge and takeout financing is fully committed with Truman Bank. The rates for the bridge and takeout are consistent with our U.S. borrowing costs, but offer tax advantages that make it significantly more cost-efficient than comparable U.S. borrowings. I’m pleased to report that Visteon’s Board of Directors had unanimously supported this action.

Slide 4 outlines the purchase price summary. The tender price per share at KWR 28,500, and the $32 million shares outstanding, bringing to an equity value for the 30% stake of $805 million. Including the 30% of the Halla net cash brings us to an enterprise value of the 30% stake at $745 million.

As outlined on slide 5, the transaction simplifies Visteon's corporate structure and creates operational, tax, and capital investment benefits. In our analysis, we have assumed a very realistic $20 million in synergies expected in the first full year, following the completion of the tender. As shown on the bottom of the page, on an EPS basis, $0.27 of net benefit due to the net impact of the elimination of the non-controlling interest, and another $0.38 from the synergies.

Now let's move to slide 6. As we look at our strategy, our focus is on two strong product lines, Climate and Electronics, where we will leverage our strengths to grow in the emerging markets while having a sharp focus on our cost structure. We will achieve double-digit margins, while generating positive and improving free cash flow, and there are opportunities to leverage our U.S. tax position.

This transaction assists in simplifying our corporate structure. The transaction also strengthens our competitive position and accretion is clear both to an adjusted EBITDA and EPS basis with at least $20 million in year one synergies. The full value of our Climate business benefits our shareholders, as we achieve improved alignment of our debt with cash flow. And it puts us in a much better position to create and manage cash, while optimizing our debt position.

Slide 7 highlights the value creation opportunities with Halla. This value is [Audio Dip] cash flow benefits and opportunities to optimize our tax situation, all with an expectation of achievable first full-year synergies of $20 million. With Halla, we will leverage global resources and economies of scale. We are confident that we can reduce capital spending, improve our global tax profile, and importantly, Halla Alabama will be included in our consolidated U.S. tax return.

Now on to slide 9. This slide provides an overview of Halla Climate Control. it's a competitive leader. It innovates, provides terrific products and has a proven product portfolio in the automotive industry, one that is supported by a track record of solid service.

Slide 10 shows that Halla’s financial profile was as strong as its growth rate and its sales are as global as are its facilities. Hyundai Kia represents nearly three-quarters of its customer base with Ford and others representing the other quarter. Since 2005, Halla has delivered a solid growth profile with a 15% compound annual growth rate through 2011.

Slide 11 states that our objective for our Climate business as to have margins that are best-in-class, so that we can continue to provide innovative products to our customers. We have a 2015 target of 13%. We believe that we can achieve this target by leveraging the full global scale of Visteon and Halla.

Slide 12 provides a transaction summary. The successful tender offer for the remaining 30% of Halla, strengthens Visteon’s competitive position, is accretive to adjusted EBITDA and EPS, as synergies that are meaningful at $20 million in the first year with upside potential. The deal has significant of benefits associated with the alignment of debt with cash flows and improved cash management. We are confident that this transaction creates near and long-term value and positions Visteon for further value-creating actions. In support of today’s call, you’ll find additional insight in the appendix to today’s deck.

Now, let’s turn it over to your questions. Scott?

Scott Deitz

Okay Rachael, let’s pool the audience for questions and with that, I will hand it over to you.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Matthew Stover, with Guggenheim.

Matthew Stover – Guggenheim Securities LLC

(Inaudible)

Martin E. Welch III

Matt, could you speak up, we cannot hear you here on the line.

Operator

And his question has been withdrawn. Your next question comes from Douglas Carlson with Bank of America.

Douglas Carlson – Bank of America/Merrill Lynch

Great guys, can you hear me?

Martin E. Welch III

Yes, we can.

Douglas Carlson – Bank of America/Merrill Lynch

Great, thank you very much for giving the detail. [Audio Dip] we’re look at a transaction that would –that looks like increased total leverage as Visteon, considering you’re paying about 800 million and bringing on [Audio Dip] EBITDA, is this debt [Audio Dip] we termed out or is this going to be just pay down with cash in the near-term on slide 12?

Martin E. Welch III

Hi, this is Martin. And we will be paying it down initially fairly aggressively, until we get down to a more normalized level, I would say, somewhere between $300 million and $500 million at which time we plan to term it out in Korea.

Douglas Carlson – Bank of America/Merrill Lynch

Okay. So the $800 million turns into $300 million to $400 million and then it just gets termed out with longer term capital, but in Korea not in the U.S. market?

Martin E. Welch III

That’s correct, so if you think about it we can, this is a vehicle that we can use over the next few years to shift our debt basically from the U.S. to Korea.

Douglas Carlson – Bank of America/Merrill Lynch

Right. That had been a concern with investors that had a view that the debt in the U.S. was really being protected by North American assets, but a lot of the income generating assets were indeed in Korea, which were not guaranteeing the bonds. Okay, that’s it from me. Thank you.

Donald J. Stebbins

Great. Thank you.

Martin E. Welch III

Thank you.

Operator

Your next question comes from Patrick Bartels with Monarch.

Donald J. Stebbins

Hi, Patrick.

Patrick Bartels – Monarch

Hey Don. How are you?

Donald J. Stebbins

Just fine.

Patrick Bartels – Monarch

Question to you related to governance with Halla, the forward split Form 4, how does the governance change? Are you going to be taking (inaudible)?

Donald J. Stebbins

Yeah, I think over time, if the tender is successful, yes we would restructure the governance of Halla as there would not be a need to have the outside directors and since it’d be 100% owned by Visteon, that’s correct.

Patrick Bartels – Monarch

Okay. Can you give us the EBITDA multiple, I believe you’re acquiring the 30% for.

Donald J. Stebbins

Martin, do you want to?

Martin E. Welch III

Right. So, there is a positive available information KIFRS info about Halla out there right now. And when we think about that multiple, it’s using that number, it’s about 5.7 times.

Patrick Bartels – Monarch

Okay, thank you.

Donald J. Stebbins

Thanks, Patrick.

Operator

Your next question comes from Dean Machado with LionEye Capital.

Dean Machado – LionEye Capital Management LLC

Hey guys. Can you hear me?

Donald J. Stebbins

Yes, we can. Thank you.

Dean Machado – LionEye Capital Management LLC

So, can you explain why the minority interest is only $53 million? If I take Halla’s fiscal 2011 net income attributable to Halla of $202 million, and multiply that by 30, I get about $61 million and that’s after the $9 million of minority interests. So why are you, why is there going to be $9 million of minority interest remaining after the deal?

Martin E. Welch III

Right. Halla has a couple of joint ventures in China that are not 100% owned by Halla. And so, there will still be minority interests associated with those subsidiaries.

Dean Machado – LionEye Capital Management LLC

Why but isn’t that the $9.4 million that’s coming out of the Halla net income in fiscal 2011? Isn’t that already accounted for?

Martin E. Welch III

Well, it will be – fully consolidated (inaudible) flow that through to the U.S. financials, that remains on that line in the U.S. financials. Is that what you mean?

Dean Machado – LionEye Capital Management LLC

No, I mean according to Halla’s financials in 2011, there was net income of $211.6 million. There was net income attributable to non-controlling interest of $9.4 million, which brings it to net income attributable to Halla Climate of $202 million. If you take $202.2 million and multiply it by 0.3, you get $60.7 million, which lines up to $62 million on your slide. So I’m trying to figure out, why there’s another $9 million that comes out?

Martin E. Welch III

Right. So I think we’re talking about the same thing and it might be useful to take this question offline and Scott and I will explain what that mean.

Dean Machado – LionEye Capital Management LLC

We can do that after the call. Let’s talk about the synergies. Why only $20 million, that numbers seems low to me.

Donald J. Stebbins

Yeah, I think that the synergies bucket into essentially three categories. One is the operational; two is the tax; and three is the capital expenditures. And so as we look at the first full year, I think the easiest synergies to get are the most, let’s say three quarters of that $20 million are going to be around tax. They will be operational for the other quarter and then there is probably another $5 million to $10 million possible on the CapEx line in that first year. We do see that improving overtime both in 2014 and 2015.

So from that perspective, we fully expect that the synergies will be greater, but what we’ve done is try to make sense in terms of using the EBITDA multiples et cetera is just to use the first year synergy.

Dean Machado – LionEye Capital Management LLC

Okay. So can you just confirm that you don’t have an agreement from KPS to tender their shares, yeah the Korean Pension System.

Donald J. Stebbins

I think the NPS came out today in Korea publicly and stated that they had not made a final decision on what they were going to do and that’s the information that we have from them.

Dean Machado – LionEye Capital Management LLC

Okay. That’s it guys.

Donald J. Stebbins

Okay, thanks Dean.

Dean Machado – LionEye Capital Management LLC

Thanks.

Operator

Your next question comes from – please hold a moment, Harpreet Anand from Oak Hill Advisors.

Harpreet Anand – Oak Hill Advisors, L.P.

Hey, guys. There is a follow-up to the NPS question. Have you received any indications from the other 20% in terms of their level of acceptance of this deal?

Martin E. Welch III

I think today, we’ve got maybe a 1,000 shares that were tendered. There are almost six million shares that traded hands today in Korea. So from our perspective on that and we don’t have all the information yet, but we would estimate or assume that that is the retail selling into the institutional, which we would view as a positive sign. So that’s the information that we have today. The press here in Korea has been let’s I think charitably all over the map, some very positive and some, with some very interesting perspectives on why we want to acquire the 30%.

Harpreet Anand – Oak Hill Advisors, L.P

Okay. And on the 5.7 times multiple that was decided is that trailing, is that you view that as forward, does that have synergies in it. Can you talk a little bit about that?

Donald J. Stebbins

Yeah, that’s trailing in 2011. So in (inaudible) so we are going to think about it.

Martin E. Welch III

Without synergies?

Donald J. Stebbins

Yeah.

Harpreet Anand – Oak Hill Advisors, L.P.

Is it without synergies?

Martin E. Welch III

That’s correct.

Harpreet Anand – Oak Hill Advisors, L.P.

Okay.

Martin E. Welch III

2011.

Harpreet Anand – Oak Hill Advisors, L.P.

Okay. Thank you, guys.

Operator

Your next question comes from Kirk Ludtke with CRT Capital Group.

Kirk Ludtke – CRT Capital Group

Hello, everyone. Can you hear me?

Donald J. Stebbins

Yes, we can, Kirk.

Kirk Ludtke – CRT Capital Group

Okay. I, maybe asking the tax question a little bit differently. What do you think your consolidated tax rate can get to a longer term, you think you can get to a normal U.S. corporate tax rate over some period of time?

Martin E. Welch III

So this is a step on continuum and as you know, Visteon has a lot of unusual tax situations around the world. So, I don’t think this is the [beyond fixing], but it is definitely a significant step up progress.

Kirk Ludtke – CRT Capital Group

Okay. And with respect to the local financing, can you talk a little bit about any restrictions on moving cash around, for instance just limitation on dividends and things like that?

Martin E. Welch III

Sure. Yes, there are some limitations on dividends that are tied to the leverage levels of Halla that the financing has completely based on Halla. And so we have the full freedom to continue to bring the cash out for corporate fees, and so forth as we’ve been charging them for many years, and there is a good room in the (inaudible) just to bring out cash in, should we need to that on an exception basis? But I think for the first period here, the dividends will be redirected towards initially paying down some of the debts.

Kirk Ludtke – CRT Capital Group

Take it to pay the financing down to the $300 million to $500 million?

Martin E. Welch III

It’s in the vicinity of three years. it depends obviously how they perform, but that’s how we’re thinking about it.

Kirk Ludtke – CRT Capital Group

Okay. So this will be a – I guess this financing looks like it’s at most an 18-month financing, is that the way to read that?

Martin E. Welch III

No. so there’s a gradual limit to take how long they’re both committed.

Kirk Ludtke – CRT Capital Group

Okay.

Martin E. Welch III

Okay. So I think it’s the two part.

Kirk Ludtke – CRT Capital Group

Okay. So you’re…

Martin E. Welch III

We take out loan as a five year.

Kirk Ludtke – CRT Capital Group

Okay. So you’ve got financing, the local financing in place for five years?

Martin E. Welch III

Yes.

Kirk Ludtke – CRT Capital Group

Okay.

Martin E. Welch III

Is the bank loan, it has the – it has aggressive amortization. So when we get down to the levels that we talked about and we will repay it and into a more [firm instruction].

Kirk Ludtke – CRT Capital Group

Okay, that’s helpful. I appreciate, I missed that. And then lastly, with respect to interiors, can you elaborate on what strategic options you see out there?

Donald J. Stebbins

Yeah, Kirk, it’s Don. I think really the important point is that we made the decision that our two core businesses are Climate and Electronics. And so that we need to move down the path of exploring one other opportunities we have for that business, be a joint-venture with another party, be at trying to look at the best in certain portions of the business et cetera. So I would say that all options are on the table at this point.

Kirk Ludtke – CRT Capital Group

Okay. I appreciate it. Thank you.

Donald J. Stebbins

Thank you.

Operator

Your next question comes from Matt Stover with Guggenheim.

Matthew Stover – Guggenheim Securities LLC

Sorry about that. Hey Don, how are you?

Donald J. Stebbins

It’s all right.

Matthew Stover – Guggenheim Securities LLC

Two questions, and you may have addressed it too. So, I apologize. That the first one is, have you folks received any kind of indications from Honda and by other (inaudible)?

Donald J. Stebbins

Yeah, this question has not been asked, but our position on that is that out of respect for the customer, that we wouldn’t disclose the contents of our discussions. However, I think everybody understands that, we understand the huge significant importance of HMG in this move. And so, what I would say is that we believe, that we’ve done the necessary work to give the tender the best chance of success.

Matthew Stover – Guggenheim Securities LLC

Okay. And then the second question is on the MOU. So part of the issue in Europe is that the cyclical issue (inaudible) with the issue here, valuation of the asset if discussed Visteon saying more if the issue here the complexity necessary associated with structuring that asset for to be a long-term competitive business.

Donald J. Stebbins

Yeah, the issue in our discussions was Europe, all around Europe, both on near-term automotive production. And then longer-term what happens to the Eurozone economies, and the SYKE and again I don't want to speak for SYKE. So in some respect I’m going across the line from what I should, but they are highly concerned about the outcome of the discussions there regarding those economies, and the impact that it will have on automotive production, especially in Western Europe. So their concerns were not at all around the price of the asset that they were going to acquire.

Matthew Stover – Guggenheim Securities LLC

Thanks very much, Don. I appreciate it.

Operator

Your next question comes from John Murphy with Bank of America.

John Murphy – Bank of America/Merrill Lynch

Hi, good morning guys. Lot of my questions have been answered here. But just, maybe just a broader question Don, and did you think about this, and this has been something it’s been in the works for a long time, it’s been wandered around in the market for really long time. Just curious to why now this is getting executed and this is a [precursor] to a lot more actions being taken in the company as far as restructuring and reorganizing business?

Donald J. Stebbins

Yeah, John I think there aren't a lot of deals like this been done in the Korean market. And so, it did take sometime to put this together probably longer than we had originally anticipated. But we got everything lined up to the stage where we could act and then if you look at the past week, the week or two actually the rumors in the marketplace has created some significant upward pressure on the HCC share, so we decided to go ahead and do this. So from that perspective – from another perspective this is right in line with the strategic plan that’s been laid out and approved at the board. So, again for us, we’ve been working on this for a fairly long period of time to make sure that we could get the right structure and the right financing in place to go ahead and launch this.

John Murphy – Bank of America/Merrill Lynch

Okay. And then just maybe a follow on Matt’s question on the centric business and Kirk told me on the strategic opportunities there. Can we think about the curious business in Europe? Clearly, the whole industry is having tough time there, so it’s not unfortunately unique to your plans and your business, but it does look like there is some likely massive restructuring that needs to go on. I’m just curious, as you guys looked at your business, what kind of cash calls you see, or restructuring expenses, you might expect going forward because it sounds like for the whole industry, not just you, it’s going to be fairly large.

Donald J. Stebbins

I think any estimate for a supplier is difficult to make because especially in the interiors business, it is really essential to the interiors business as to what customer facility as you are alluding to customer facilities are going to get shutdown and that would heavily impact any restructuring that we might have to do. At this point in time from what we know, it’s not a significant issue in terms of the plant going down and therefore we have to make an adjustment in our footprint.

So will we have to you know take the necessary steps as production volumes go down, yes, but I would call that normal operating adjustments. But in terms of what we’ve been told both by our customers and what we read in the paper, there is nothing that is out there that we would have to close the facility. But again I would caveat that by saying, you know, it’s only when we get that information from the customer that we would know for sure.

John Murphy – Bank of America/Merrill Lynch

And there's consolidators reasonably active in the interior space globally. Have you had discussions with them as potentially (inaudible) the business and would you be willing to pay to potentially get rid of this business and really get back to your two core operations?

Donald J. Stebbins

I think we would look at all the different options that are available to us to ensure that we can focus on our two core businesses and create shareholder value.

John Murphy – Bank of America/Merrill Lynch

Okay. Thank you very much.

Donald J. Stebbins

Thanks John.

Operator

Your next question comes from Brian Johnson with Barclays.

Brian Johnson – Barclays Capital, Inc.

Good morning or good evening to you over there. Just a couple of questions, a little bit of housekeeping and then sort of following-up on the theme of strategic direction. On the housekeeping, the $20 million in synergies you mentioned tax, but on page five you show the after-tax interest expense. So my question is, does that $20 million include the tax shield at Halla on the interest or is that the tax savings within that over and above the after-tax – over and above the tax you accreted by the interest?

Donald J. Stebbins

Yeah, no, it does not. It does not include the tax shield of the interest expense. So I can’t go into too much detail, but essentially the ownership structure of the subsidiaries, we mentioned Halla Alabama that certainly is one of those things and but the flow of cash around the world and reorganizing that and how that moves in the subsidiaries are two important pieces of that number.

Brian Johnson – Barclays Capital, Inc.

Okay, good. I just want to make sure – so there are really two sources of tax savings, but – because the after tax interest also helps. Second question is, a lot of your shareholders have been talking about the opportunity to reduce U.S. based SG&A by simplifying the corporate structure and really had in mind both of these transactions. Given you have done or hopefully will get the Halla done, but long have the interiors done. How should we be thinking about the SG&A, if some of that is going to come down is that within that $20 million just from eliminating, overlapping Halla and obviously on U.S. head count and then is there head count in the U.S. monitoring interiors that’s going to be around for a while longer.

Donald J. Stebbins

Yeah, I think certainly. One of our game plans had been that a number of corporate people would transfer to YFV in that transaction just as a number of folks are going to transfer to (inaudible) in the lighting deal. So clearly that has changed that the support functions will need to remain. There are some synergies at the administrative level, the SG&A level from the Halla tender, but that’s really not the significant portion of those, the operational synergies that we’ve included in the 20. There are certainly cost associated with running two public companies that really make up the significant portion along with purchasing, manufacturing and those types of functions.

Brian Johnson – Barclays Capital, Inc.

Okay, thanks.

Donald J. Stebbins

All right, thank you.

Operator

Your next question comes from Joseph von Meister with Bennett.

Donald J. Stebbins

Joseph?

Operator

Okay. Your next question comes from Gordon Wright with Pentwater Capital.

Arthur Kaz – Pentwater Capital

Don, its Arthur Kaz, thank you for the call.

Donald J. Stebbins

Hi, Arthur.

Arthur Kaz – Pentwater Capital

Hey, I want to if I may drill into that, it’s a question of further synergies beyond the $20 million that you guys talked about in the first year. Can you talk either in merit terms or in functional terms about some of where the remaining synergies are, or could you give guidance for what the long-term synergy prospects are?

Donald J. Stebbins

Yeah, I think really. It’s easier to talk where they come from and certainly as we think about operational, the communization of designs and engineering are probably two large areas for us. And that takes some time in terms of implementing itself. That’s why – one of the previous questions were, the $20 million looks fairly small. So I would think that the operational synergies would ramp up probably be double what it is in the first year maybe triple over three years, purchasing leverage and process communization would also be two other areas that we would benefit as we move forward over time, but again those things are not day one type synergy that you get just from the acquisition of the shares.

Arthur Kaz – Pentwater Capital

All right, thank you.

Operator

(Operator Instructions) We have a follow-up from Joseph von Meister with Bennett.

Joseph von Meister – Bennett Management

Hi, hi guys, can you hear me?

Donald J. Stebbins

Yes, we can Joseph.

Joseph von Meister – Bennett Management

I was getting the impression that one of the strategies that Visteon was going to undertake is to unlock shareholder value in it. It seems to me that one way to do that would be to spin Halla to the shareholders. How does this transaction serve the objective of unlocking value with in Visteon versus the alternative? In other words, why this versus letting Halla be a standalone? I’m sure there is a good reason for it. I just thought I had kind of expected this to go the other way.

Donald J. Stebbins

Yeah, I think a couple of folders that we’ve looked at a number of different scenarios with our advisors, not us, not only management, but the board has examined a number of these types of things, and from our view it is best to keep the number two climate business together and solidify that market position so to speak in that competitive position versus splitting up the two businesses and having a number four and a number five there is more value created both for the company and the shareholders to combine the two businesses into one and let it compete in the marketplace versus splitting it in two.

Operator

Your next question comes from Jeff Kirt with Oak Hill Advisors.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Hi.

Donald J. Stebbins

Yes.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Two question on – I’m not familiar with Korean tender law. What is this, what are the squeeze out provisions there, what’s the threshold percentage that you need to effect the acquisitions?

Donald J. Stebbins

We need to be smarty. We need to have 95% of the total outstanding shares and once that occurs under the Korean law, we can begin process to squeeze out the remaining 5%. So that’s why we made the tender conditional on achieving that level of overall ownership.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Okay. And then operationally you talked to – number of people asked about synergies. Can you just outline operationally how that the broader climate business after synergies is going to be structured, is everything going to be folded into Halla or there is still going to non-Halla business?

Donald J. Stebbins

Well, the base of the Visteon climate business to Hyundai, Kia would absolutely remain the same. So our Korean team here has built a wonderful relationship with Hyundai, Kia and first level is that we don’t want to change that at all. In terms of running the Halla business Y.H. Park would continue to run that business. He has done an excellent job. So that would continue. So the structure in terms of how the business is run would remain the same in terms of the interface to Halla. It really is underneath that where are the changes would take place.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

I mean, what about the interface with – if there is a non-Halla climate customer, is everything going to be rolled in under Halla or it’s going to – if I understand it probably part of it is bigger than the non-Halla business?

Donald J. Stebbins

No, no. We will not roll everything in underneath Halla. It will remain structured predominantly as it is today. It’s clearly, we are always looking at different organizational models and which is the best to – best way to serve the customer and gain efficiencies for the business, but we would not roll everything underneath the Halla group.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Okay. I assume it will be consolidated engineering and things you can consolidate?

Donald J. Stebbins

Absolutely, absolutely. So you’d have a global purchasing function, a global manufacturing and a global engineering function.

Jeffrey E. Kirt – Oak Hill Advisors, L.P.

Okay. Thanks.

Operator

Your next question comes from Barry Konig with Cumberland Associates.

Barry Konig – Cumberland Associates LLC

Good evening, guys. Nice to hear from you.

Donald J. Stebbins

Thanks.

Barry Konig – Cumberland Associates LLC

Can you give a little more detail on slide number six, the U.S. leverage, the U.S. NOLs, can you give a little detail on how that would actually work?

Martin E. Welch III

So the first strategy, the one that Don mentioned, which is to include the Halla Alabama facility in the U.S. consolidated cash material. So today, that’s not true because we control 80% of it, and so that would be an obvious advantage.

Barry Konig – Cumberland Associates LLC

Have you disclosed how much income that would represent?

Martin E. Welch III

We have not.

Barry Konig – Cumberland Associates LLC

And is there any way for us to estimate this now, since you’re obviously be disclosing it, when you do file it later?

Martin E. Welch III

Well, we’re going to begin to disclose our EBITDA by segment – by business segment, which would not be down to the plant level. So, we wouldn’t be talking about Halla Alabama specifically now.

Barry Konig – Cumberland Associates LLC

And does Halla Alabama have any commitment to pay any of the interest coverage on the new loan in Korea?

Martin E. Welch III

No. It is 100% Korean transaction, and not guaranteed by the parent company.

Barry Konig – Cumberland Associates LLC

So other than being able to take consolidated Halla Alabama operation, there’s no other additional utilization of the NOL in the United States?

Martin E. Welch III

No. I didn’t say that. There are other tax strategies, but we are not in a position to touch that right now.

Barry Konig – Cumberland Associates LLC

Okay. So we should maybe look forward to more benefits coming towards the U.S. in NOL utilization?

Donald J. Stebbins

Yes, absolutely.

Barry Konig – Cumberland Associates LLC

Okay. All my other questions have been answered. Thank you very much.

Donald J. Stebbins

Thanks Barry.

Martin E. Welch III

Thank you, Barry.

Scott Deitz

Rachel, we have time for one more question.

Operator

Okay. Your next question comes from Douglas Carson with Bank of America.

Douglas Carson – Bank of America Merrill/Lynch

Great, guys. Just a quick follow-up and it may have just being answered. On the debtors in Korea there is no North American guarantors for that debt?

Martin E. Welch III

That’s correct.

Douglas Carson – Bank of America Merrill/Lynch

So it’s completely just guaranteed by the Korean assets. It’s unsecured facility or secured facility?

Donald J. Stebbins

It’s secured by the shares.

Martin E. Welch III

Yeah, it’s secured by the shares of Halla.

Douglas Carson – Bank of America Merrill/Lynch

Okay. All right, very good. Thank you. That’s it from me.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect at this time. Good day.

Scott Deitz

Thank you.

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