K&E 17410969.40

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

) In re: ) Chapter 11 ) VISTEON CORPORATION, et al.,1 )

)Case No. 09-11786 (CSS)

) Jointly Administered Debtors. ) )

REORGANIZING DEBTORS’ MEMORANDUM OF LAW (I) IN SUPPORT OF CONFIRMATION OF THE FIFTH AMENDED JOINT PLAN OF REORGANIZATION

OF VISTEON CORPORATION AND ITS DEBTOR AFFILIATES PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE AND (II) IN

RESPONSE TO OBJECTIONS THERETO

PACHULSKI STANG ZIEHL & JONES LLP KIRKLAND & ELLIS LLP Laura Davis Jones (DE Bar No. 2436) James H. M. Sprayregen, P.C. (IL 6190206) James E. O’Neill (DE Bar No. 4042) James J. Mazza, Jr. (IL 6275474) 919 North Market Street, 17th Floor 300 North LaSalle Wilmington, Delaware 19899-8705 Chicago, Illinois 60654 Telephone: (302) 652-4100 Telephone: (312) 862-2000

Marc Kieselstein, P.C. (IL 6199255) 601 Lexington Avenue

New York, New York 10022-4611 Telephone: (212) 446-4800 Attorneys for the Debtors and Debtors in Possession Dated: August 27, 2010

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification

number, are: Visteon Corporation (9512); ARS, Inc. (3590); Fairlane Holdings, Inc. (8091); GCM/Visteon Automotive Leasing Systems, LLC (4060); GCM/Visteon Automotive Systems, LLC (7103); Infinitive Speech Systems Corp. (7099); MIG-Visteon Automotive Systems, LLC (5828); SunGlas, LLC (0711); The Visteon Fund (6029); Tyler Road Investments, LLC (9284); VC Aviation Services, LLC (2712); VC Regional Assembly & Manufacturing, LLC (3058); Visteon AC Holdings Corp. (9371); Visteon Asia Holdings, Inc. (0050); Visteon Automotive Holdings, LLC (8898); Visteon Caribbean, Inc. (7397); Visteon Climate Control Systems Limited (1946); Visteon Domestic Holdings, LLC (5664); Visteon Electronics Corporation (9060); Visteon European Holdings Corporation (5152); Visteon Financial Corporation (9834); Visteon Global Technologies, Inc. (9322); Visteon Global Treasury, Inc. (5591); Visteon Holdings, LLC (8897); Visteon International Business Development, Inc. (1875); Visteon International Holdings, Inc. (4928); Visteon LA Holdings Corp. (9369); Visteon Remanufacturing Incorporated (3237); Visteon Systems, LLC (1903); Visteon Technologies, LLC (5291). The location of the Debtors’ corporate headquarters and the service address for all the Debtors is: One Village Center Drive, Van Buren Township, Michigan 48111.

¨0¤{1v*(; */«

0911786100827000000000010

Docket #4045 Date Filed: 8/27/2010

iK&E 17410969.40

TABLE OF CONTENTS

I. PRELIMINARY STATEMENT .........................................................................................14

II. STATUS OF OBJECTIONS ...............................................................................................16

A. Valuation and Best Interests Test Objections ............................................16

B. Disparate Treatment Objections ................................................................17

C. OPEB Objections .......................................................................................20

III. BACKGROUND .................................................................................................................22

A. Voting Results. ...........................................................................................24

1. Each Impaired Class of Claims and Interests Has Accepted the Plan...........................................................................................24

B. Modifications to the Plan. ..........................................................................26

IV. ARGUMENT ......................................................................................................................28

A. The Plan Should Be Confirmed. ................................................................29

1. The Plan Complies with Section 1129(a)(1) of the Bankruptcy Code. ..........................................................................29

a. The Plan Satisfies the Classification Requirements of Section 1122 of the Bankruptcy Code. ..........................30

b. The Plan Satisfies the Seven Mandatory Plan Requirements of Sections 1123(a)(1) - (a)(7) of the Bankruptcy Code. ..............................................................32

i. The Plan Designates Classes of Claims and Interests (Section 1123(a)(1)). ...............................33

ii. The Plan Specifies Unimpaired Classes of Claims and Interests (Section 1123(a)(2)). ............33

iii. The Plan Specifies the Treatment of Impaired Classes of Claims and Interests (Section 1123(a)(3)). ..............................................33

iiK&E 17410969.40

iv. The Plan Provides the Same Treatment for Each Claim or Interest in a Particular Class (Section 1123(a)(4)). ..............................................34

v. The Plan Provides Adequate Means for Its Implementation (Section 1123(a)(5)). ...................35

vi. The Plan Prohibits the Issuance of Nonvoting Equity Securities (Section 1123(a)(6)). ............................................................36

vii. The Plan’s Provisions for Selecting Directors and Officers Are Consistent with Stakeholders’ Interests and Public Policy (Section 1123(a)(7)). ..............................................37

c. Discretionary Contents Of The Plan. .................................37

d. The Release, Exculpation, and Injunction Provisions Are Integral Components of the Plan. ..............38

i. The Debtors’ Release of Claims Is in the Best Interest of the Debtors’ Constituents. ............39

ii. The Non-Debtor Releases of Third Parties Are Consensual. .....................................................41

iii. The Exculpation Sought in the Plan Is Appropriate. ...........................................................42

iv. The Injunction Sought Is Necessary to Enforce the Releases and Exculpations Contained in the Plan. ............................................44

2. The Debtors Have Complied Fully With the Applicable Provisions of the Bankruptcy Code (Section 1129(a)(2))..............45

3. The Plan Has Been Proposed in Good Faith and Not By Any Means Forbidden by Law (Section 1129(a)(3)). ....................47

4. The Plan Provides For Bankruptcy Court Approval of Certain Administrative Payments (Section 1129(a)(4)). ...............49

5. The Plan Discloses All Information Regarding the Post-Emergence Directors and Officers (Section 1129(a)(5)). ..............50

iiiK&E 17410969.40

6. The Plan Does Not Require Governmental Regulatory Approval (Section 1129(a)(6)). ......................................................55

7. The Plan is in the Best Interests Of Creditors and Interest Holders (Section 1129(a)(7)). ........................................................55

8. Acceptance of Impaired Classes (Section 1129(a)(8)). .................59

9. The Plan Complies with Statutorily Mandated Treatment of Administrative and Priority Tax Claims (Section 1129(a)(9)). ....................................................................................60

10. At Least One Impaired Class of Claims Has Accepted the Plan, Excluding the Acceptances of Insiders (Section 1129(a)(10)). ..................................................................................60

11. The Plan Is Feasible (Section 1129(a)(11)). ..................................61

12. The Plan Provides for the Payment of All Fees Under 28 U.S.C. § 1930 (Section 1129(a)(12)). ............................................65

13. The Plan Complies with Section 1129(a)(13) of the Bankruptcy Code. ..........................................................................65

B. Responses To Objections. ..........................................................................66

1. Section 1129(b) of the Bankruptcy Code and Its Absolute Priority Rule Are Not Applicable to the Plan. ...............................66

2. Objections Based on the Best Interests Test Should Be Overruled. ......................................................................................68

3. The Plan Complies with Section 1123(a)(4) of the Bankruptcy Code. ..........................................................................73

a. Treatment of Class J Interests Does Not Violate Section 1123(a)(4). ............................................................73

b. Limiting the Benefit of Releases to Creditors and Interest Holders Who Vote in Favor of the Plan Does Not Violate Section 1123(a)(4). ...............................74

c. The Inactive Employees’ Objection Should Be Overruled. ..........................................................................75

4. AHEC’s Members’ Votes Should Not Be Designated. .................76

ivK&E 17410969.40

5. The Plan Complies with Section 1114 of the Bankruptcy Code. ..............................................................................................79

6. The Plan Treats Exectuory Contracts in Accordance with the Bankruptcy Code. .....................................................................80

V. CONCLUSION ...................................................................................................................82

TABLE OF AUTHORITIES

CASES

Ad Hoc Comm. of Pers. Injury Asbestos Claimants v. Dana Corp.(In re Dana Corp.),412 B.R. 53 (Bankr. S.D.N.Y. 2008) .......................................................................... 22, 65

Aetna Cas. & Sur. Co. v. Clerk, U.S. Bankr. Ct., N.Y. (Chateaugay), 89 F.3d 942 (2d Cir. 1996)................................................................................................ 18

B.D. Int’l Disc. Corp. v. Chase Manhattan Bank (In re B.D. Int’l Disc. Corp.),701 F.2d 1071 (2d Cir. 1983)............................................................................................ 37

Bank of Am. Nat’l Trust & Sav. Ass’n v. 203 N. LaSalle St. P’ship,526 U.S. 434 (1999) .......................................................................................................... 36

Computer Task Grp., Inc. v. Brotby (In re Brotby),303 B.R. 177 (B.A.P. 9th Cir. 2003)................................................................................. 51

Enron Corp. v. The New Power Co. (In re The New Power Co.),438 F.3d 1113 (11th Cir. 2006) .................................................................................. 14, 33

Figter, Ltd. v. Teachers Ins. & Annuity Ass’n of Am. (In re Figter, Ltd.), 118 F.3d 635 (9th Cir. 1997) ............................................................................................ 67

Fin. Sec. Assurance Inc. v. T-H New Orleans Ltd. P’ship(In re T-H New Orleans Ltd. P’ship), 116 F.3d 790 (5th Cir. 1997) ............................................................................................ 37

Fitzsimons v. Walsh (In re FitzSimmons),725 F.2d 1208 (9th Cir. 1984) .......................................................................................... 37

Frito-Lay, Inc., v. LTV Steel Co.(In re Chateaugay Corp.), 10 F.3d 944 (2d Cir. 1993)...................................................... 18

Gillman v. Cont’l Airlines (In re Cont’l Airlines Inc.), 203 F.3d 203 (3d Cir. 2000).............................................................................................. 30

vK&E 17410969.40

Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd. II(In re Briscoe Enters., Ltd. II), 994 F.2d 1160 (5th Cir. 1993) .......................................................................................... 16

In re 11,111, Inc.,117 B.R. 471 (Bankr. D. Minn. 1990) .............................................................................. 18

In re A.H. Robins Co.,No. 98-1080, 1998 WL 637401 (4th Cir. Aug. 31, 1998) ................................................ 35

In re Adelphia Commc’n Corp.,359 B.R 54 (Bankr. S.D.N.Y. 2006) ................................................................................. 68

In re Adelphia Commc’ns Corp.,368 B.R. 140 (Bankr. S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d Cir. 2008) ... 57, 58, 63, 64

In re AG Consultants Grain Div., Inc.,77 B.R. 665 (Bankr. N.D. Ind. 1987) ................................................................................ 41

In re Allegheny Int’l, Inc.,118 B.R. 282 (Bankr. W.D. Pa. 1990) .............................................................................. 68

In re Am. Solar King Corp.,90 B.R. 808 (Bankr. W.D. Tex. 1988) .............................................................................. 41

In re AOV Indus. Inc.,792 F.2d 1140 (D.C. Cir. 1986) .................................................................................. 22, 30

In re Apex Oil Co.,118 B.R. 683 (Bankr. E.D. Mo. 1990) ........................................................................ 40, 43

In re Armstrong World Indus., Inc.,348 B.R. 111 (D. Del. 2006) ............................................................................................. 16

In re Arrowmill Dev. Corp.,211 B.R. 497 (Bankr. D.N.J. 1997) .................................................................................. 30

In re Bally Total Fitness of Greater N.Y., Inc.,No. 07-12395, 2007 WL 2779438 (Bankr. S.D.N.Y. Sept. 17, 2007) .............................. 17

In re Beyond.com Corp.,289 B.R. 138 (Bankr. N.D. Cal. 2003) ............................................................................. 43

In re Bonded Mailings, Inc.,20 B.R. 781 (Bankr. E.D.N.Y. 1982) ................................................................................ 37

viK&E 17410969.40

In re Briscoe Enters.,994 F.2d 1160 (5th Cir. 1993) .......................................................................................... 51

In re Bugg,172 B.R. 781 (E.D. Pa. 1994) ........................................................................................... 19

In re Century Glove, Inc.,Nos. 90-400, 90-401, 1993 WL 239489 (D. Del. Feb. 10, 1993) ............................... 37, 67

In re CF&I Fabricators of Utah, Inc.,150 F.3d 1293 (10th Cir. 1998) ........................................................................................ 62

In re Clamp-All Corp.,233 B.R. 198 (Bankr. D. Mass. 1999) .............................................................................. 35

In re Clarkson,767 F.2d 417 (8th Cir. 1985) ............................................................................................ 51

In re Coram Healthcare Corp.,315 B.R. 321 (Bankr. D. Del. 2004) ................................................................................. 28

In re Delphi Corp.,No. 05-44418 (Bankr. S.D.N.Y. Jan. 25, 2008) ................................................................ 41

In re Dragone,324 B.R. 445 (Bankr. D. Conn. 2005) .............................................................................. 37

In re Drexel Burnham Lambert Group, Inc.,960 F.2d 285 (2d Cir. 1992)........................................................................................ 33, 49

In re Drexel Burnham Lambert Grp., Inc.,138 B.R. 723 (Bankr. S.D.N.Y. 1992) ............................................................ 17, 39, 40, 42

In re Dune Deck Owners Corp.,175 B.R. 839 (Bankr. S.D.N.Y. 1995) ........................................................................ 67, 68

In re Eagle Bus Mfg., Inc.,134 B.R. 584 (Bankr. S.D. Tex. 1991), aff’d, 158 B.R. 421 (S.D. Tex. 1993) ................................................................................................................................. 41

In re Eddington Thread Mfg. Co.,181 B.R. 826 (Bankr. E.D. Pa. 1995) ............................................................................... 51

In re El Charro, Inc.,No. 05-60294, 2007 WL 2174911 (Bankr. D. Kan. July 26, 2007) ................................. 17

viiK&E 17410969.40

In re Elsinore Shore Assocs.,91 B.R. 238 (Bankr. D.N.J. 1988) .................................................................................... 39

In re Genesis Health Ventures, Inc.,266 B.R. 591 (Bankr. D. Del. 2001) ................................................................................. 16

In re Gibson Grp., Inc.,66 F.3d 1436 (6th Cir. 1995) ............................................................................................ 37

In re Granite Broad. Corp.,369 B.R. 120 (Bankr. S.D.N.Y. 2007) .............................................................................. 37

In re Greate Bay Hotel & Casino, Inc.,251 B.R. 213 (Bankr. D.N.J. 2000) .................................................................................. 18

In re Heritage Org., L.L.C.,375 B.R. 230 (Bankr. N.D. Tex. 2007) ............................................................................. 18

In re Holly Knoll P’ship,167 B.R. 381 (Bankr. E.D. Pa. 1994) ............................................................................... 68

In re Jersey City Med. Ctr.,817 F.2d 1055 (3d Cir. 1987)............................................................................................ 18

In re Joint E. & S. Dist. Asbestos Litig.,982 F.2d 721 (2d Cir. 1992), modified on reh’g, 993 F.2d 7 (2d Cir. 1993) .................... 22

In re Kovalchick,175 B.R. 863 (Bankr. E.D. Pa. 1994) ............................................................................... 67

In re Landing Assocs., Ltd.,157 B.R. 791 (Bankr. W.D. Tex. 1993) ............................................................................ 68

In re Lapworth,No. 97-34529, 1998 WL 767456 (Bankr. E.D. Pa. Nov. 2, 1998) ................................... 34

In re Lear Corp.,No. 09-14326 (Bankr. S.D.N.Y. Nov. 5, 2009) ................................................................ 44

In re MacLeod Co.,63 B.R. 654 (Bankr. S.D. Ohio 1986) ............................................................................... 68

In re Madison Hotel Assocs.,749 F.2d 410 (7th Cir. 1984) ............................................................................................ 37

viii K&E 17410969.40

In re Mirant Corp.,No. 03-46590, 2007 WL 1258932 (Bankr. N.D. Tex. Apr. 27, 2007) ............................. 18

In re Mirant Corp.,No. 03-46590, 2007 WL 2753277 (Bankr. N.D. Tex. Sept. 19, 2007) ............................. 17

In re Monroe Well Serv., Inc.,80 B.R. 324 (Bankr. E.D. Pa. 1987) ................................................................................. 30

In re NII Holdings, Inc.,288 B.R. 356 (Bankr. D. Del. 2002) ................................................................................. 40

In re Pleasant Hill Partners, L.P.,163 B.R. 388 (Bankr. N.D. Ga, 1994) .............................................................................. 67

In re Portola Packaging, Inc.,No. 08-12001 (Bankr. D. Del. Oct. 14, 2008) .................................................................. 41

In re Premier Int’l Holdings, Inc.,No. 09-12019, 2010 WL 2745964 (Bankr. D. Del. Apr. 30, 2010) ........................... passim

In re Prudential Energy Co.,58 B.R. 857 (Bankr. S.D.N.Y. 1986) .......................................................................... 51, 52

In re PWS Holding Corp.,228 F.3d 224 (3d Cir. 2000)........................................................................................ 31, 33

In re Quigley Co.,377 B.R. 110 (Bankr. S.D.N.Y. 2007) .............................................................................. 23

In re Repurchase Corp.,332 B.R. 336 (Bankr. N.D. Ill. 2005) ............................................................................... 52

In re Resorts Int’l, Inc.,145 B.R. 412 (Bankr. D.N.J. 1990) .................................................................................. 23

In re Rusty Jones, Inc.,110 B.R. 362 (Bankr. N.D. Ill. 1990) ............................................................................... 42

In re Sherwood Square Assocs.,107 B.R. 872 (Bankr. D. Md. 1989) ................................................................................. 43

In re Simplot,No. 06-00002, 2007 WL 2479664 (Bankr. D. Idaho Aug. 28, 2007) ............................... 14

ixK&E 17410969.40

In re Snyder,56 B.R. 1007 (N.D. Ind. 1986) ......................................................................................... 35

In re Sound Radio, Inc.,93 B.R. 849 (Bankr. D.N.J. 1988), aff’d in part, remanded in part,103 B.R. 521 (D.N.J. 1989), aff’d, 908 F.2d 964 (3d Cir. 1990) ............................... 36, 37

In re Source Enters., Inc.,392 B.R. 541 (S.D.N.Y. 2008) ...................................................................................... 5, 64

In re Source Enters., Inc.,No. 06-11707, 2007 WL 2903954 (Bankr. S.D.N.Y. Oct. 1, 2007) ........................... 37, 45

In re Spansion, Inc.,426 B.R. 114 (Bankr. D. Del. 2010) ................................................................................. 30

In re Spansion, Inc.,No. 09-10690, 2010 WL 2905001 (Bankr. D. Del. Apr. 16, 2010) ...................... 31, 34, 44

In re Specialty Equip. Cos.3 F.3d 1043 (7th Cir. 1993) .............................................................................................. 30

In re Spiegel, Inc.,No. 03-11540, 2005 WL 1278094 (Bankr. S.D.N.Y. May 25, 2005) .............................. 14

In re Stallion Oilfield Servs., Ltd.,No. 09-13562 (Bankr. D. Del. Jan. 12, 2010) ............................................................. 31, 34

In re Stratford Assocs. Ltd. P’ship,145 B.R. 689 (Bankr. D. Kan. 1992) ................................................................................ 43

In re Sun Country Dev. Inc.,764 F.2d 406 (5th Cir. 1985) ............................................................................................ 37

In re Sweetwater,57 B.R. 354 (D. Utah 1985) .............................................................................................. 14

In re Texaco, Inc.,84 B.R. 893 (Bankr. S.D.N.Y. 1988) .............................................................. 34, 40, 51, 52

In re The Leslie Fay Cos.,207 B.R. 764 (Bankr. S.D.N.Y. 1997) .............................................................................. 52

In re Toy & Sports Warehouse, Inc.,37 B.R. 141 (Bankr. S.D.N.Y. 1984) ................................................................................ 42

xK&E 17410969.40

In re Tropicana Entm’t, LLC,No. 08-10856 (Bankr. D. Del. May 5, 2009) .............................................................. 31, 34

In re U.S. Truck,47 B.R. 932 (E.D. Mich. 1985), aff’d, 800 F.2d 581 (6th Cir. 1986) ............................... 51

In re United Marine, Inc.,197 B.R. 942 (Bankr. S.D. Fla. 1996) .............................................................................. 57

In re UNR Indus., Inc.,143 B.R. 506 (Bankr. N.D. Ill. 1992), rev’d on other grounds, 173 B.R. 149 (N.D. Ill. 1994)....................................................................................................... 7, 63

In re US Airways Group, Inc.,296 B.R. 673 (D. Va. 2003) .............................................................................................. 62

In re West Coast Video Entrs., Inc.,174 B.R. 906 (Bankr. E.D. Pa. 1994) ............................................................................... 30

In re Worldcom,No. 02-13533, 2003 WL 23861928 (Bankr. S.D.N.Y. Oct. 31, 2003) ................. 34, 39, 52

In re WRN 1301, Inc.,No. 06-41381, 2007 WL 1555812 (Bankr. E.D. Tex. May 24, 2007) .............................. 14

In re Zenith Elecs. Corp.,241 B.R. 92 (Bankr. D. Del. 1999) ............................................................................. 30, 36

IUE-CWA v. Visteon Corp. (In re Visteon Corp.),No. 10-1944, 2010 WL 2735715 (3d Cir. July 13, 2010) ........................................... 56, 70

John Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs.,987 F.2d 154 (3d Cir. 1993).............................................................................................. 18

Kaiser Aerospace Corp. v. Teledyne Indus., Inc. (In re Piper Aircraft Corp.),244 F.3d 1289 (11th Cir. 2001) ........................................................................................ 37

Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636 (2d Cir. 1988)........................................................................................ 17, 51

Lisanti Foods, Inc. v. Lubetkin (In re Lisanti Foods, Inc.), 329 B.R. 491 (D.N.J. 2005) .............................................................................................. 39

Mabey v. Sw. Elec. Power Co. (In re Cajun Elec. Power Coop., Inc.), 150 F.3d 503 (5th Cir. 1998) ............................................................................................. 34

xiK&E 17410969.40

McCormick v. Banc One Leasing Corp. (In re McCormick), 49 F.3d 1524 (11th Cir. 1995) .......................................................................................... 37

Mercury Capital Corp. v. Milford Conn. Assocs., Ltd. P’ship,354 B.R. 1 (D. Conn. 2006) .............................................................................................. 51

Myers v. Martin (In re Martin), 91 F.3d 389 (3d Cir. 1996)................................................................................................ 30

Pennbank v. Winters (In re Winters), 99 B.R. 658, 663 (Bankr. W.D. Pa. 1989) .................................................................... 4, 58

Teamsters Nat’l Freight Indus. Negotiating Comm. v. U.S. Truck Co.(In re U.S. Truck Co.), 800 F.2d 581 (6th Cir. 1986) ............................................................................................ 52

The Finova Grp. V. BNP Paribas (In re Finova Grp., Inc.), 304 B.R. 630, 637 (D. Del. 2004) ..................................................................................... 22

The Mut. Life Ins. Co. of N.Y. v. Patrician St. Joseph Partners Ltd. P’ship (In re Patrician St. Joseph Partners Ltd. P’ship), 169 B.R. 669 (D. Ariz. 1994)............................................................................................ 51

STATUTES

11 U.S.C. § 1122(a) ...................................................................................................................... 18

11 U.S.C. § 1123(a)(1) ............................................................................................................ 21, 25

11 U.S.C. § 1123(a)(4) .............................................................................................................. 7, 21

11 U.S.C. § 1123(a)(7) ...................................................................................................... 21, 25, 26

11 U.S.C. § 1123(b)(3)(B) ............................................................................................................ 26

11 U.S.C. § 1123(b)(5) ................................................................................................................. 26

11 U.S.C. § 1123(b)(6) ................................................................................................................. 26

11 U.S.C. § 1125(b) ...................................................................................................................... 35

11 U.S.C. § 1126(c) ...................................................................................................................... 49

11 U.S.C. § 1126(d) ...................................................................................................................... 49

11 U.S.C. § 1126(e) ...................................................................................................................... 67

xiiK&E 17410969.40

11 U.S.C. § 1126(f) ....................................................................................................................... 49

11 U.S.C. § 1126(g) ...................................................................................................................... 49

11 U.S.C. § 1127(a) ...................................................................................................................... 14

11 U.S.C. § 1127(d) ................................................................................................................ 14, 15

11 U.S.C. § 1129(a)(1) .................................................................................................................. 17

11 U.S.C. § 1129(a)(10) ................................................................................................................ 51

11 U.S.C. § 1129(a)(11) ................................................................................................................ 51

11 U.S.C. § 1129(a)(12) ................................................................................................................ 55

11 U.S.C. § 1129(a)(13) ................................................................................................................ 55

11 U.S.C. § 1129(a)(3) .................................................................................................................. 36

11 U.S.C. § 1129(a)(4) .................................................................................................................. 39

11 U.S.C. § 1129(a)(5)(A) ............................................................................................................ 40

11 U.S.C. § 1129(a)(5)(A)(ii) ....................................................................................................... 42

11 U.S.C. § 1129(a)(5)(B) ............................................................................................................ 40

11 U.S.C. § 1129(a)(6) .................................................................................................................. 45

11 U.S.C. § 1129(a)(7)(A)(i) ........................................................................................................ 45

11 U.S.C. § 1129(a)(7)(A)(ii) ....................................................................................................... 45

11 U.S.C. § 1129(a)(8) (B) ........................................................................................................... 49

11 U.S.C. § 1129(a)(8)(A) ............................................................................................................ 49

11 U.S.C. § 1129(a)(9) .................................................................................................................. 49

11 U.S.C. § 1129(b)(1) ................................................................................................................. 57

11 U.S.C. 1123(a)(4) ..................................................................................................................... 63

RULES

Bankruptcy Rule 2002 .................................................................................................................. 13

xiii K&E 17410969.40

Bankruptcy Rule 2019 .................................................................................................................. 66

Bankruptcy Rule 9019 ............................................................................................................ 28, 29

OTHER AUTHORITIES

COLLIER ON BANKRUPTCY, ¶ 1129.02[5][b] (16th ed. rev) ............................................................ 43

H.R. REP. NO. 95-595 (1977) ........................................................................................................ 34

S. REP. NO. 95-989 (1978) ...................................................................................................... 34, 49

K&E 17410969.40

I. PRELIMINARY STATEMENT

1. Having stabilized its operations during a severe economic crisis that acutely

afflicted the automotive sector, completed a significant operational restructuring, and preserved

its customer and supplier relationships while navigating the chapter 11 process, Visteon now

presents its toggle plan for confirmation.2

2. The toggle Plan, which has been accepted by a heavy majority of all impaired

classes of claims and interests, is premised on a junior capital equity raise of $1.25 billion. That

capital has been largely delivered already—with the Plan’s $950 million rights offering to

unsecured note holders (the “Note Holders”) having been oversubscribed by more than

$110 million and placed in escrow. The investors under the Court-approved equity commitment

agreement (the “Equity Commitment Agreement”)3 have also each delivered funding certificates

to the Debtors evidencing their commitment and wherewithal to deliver the $300 million direct

purchase commitment (the “Direct Commitment”). Additionally, just two days ago, Visteon

filed a motion4 to approve the payment of certain fees and other obligations in connection with

its entry into a commitment letter for exit financing facilities totaling $700 million, which will

2 See Fifth Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the

United States Bankruptcy Code, attached hereto as Exhibit A (together with previously filed versions of the toggle plan construct, the “Plan”). Any capitalized terms used but not defined in this memorandum shall have the meanings ascribed to them in the Plan.

3 See Order Authorizing the Debtors to Enter Into: (A) a Plan Support Agreement; (B) an Equity Commitment Agreement and to Pay Certain Fees in Connection Therewith; and (C) a Cash Recovery Backstop Agreement.[Docket No. 3427].

4 See Debtors Motion for an Order Authorizing the Debtors to (A) Enter into an Exit Financing Commitment Letter and Related Fee Letters, (B) Incur and Pay Certain Fees and Costs in Connection Therewith, and (C) File the Fee Letters Under Seal Filed by Visteon Corporation [Docket No. 4033].

K&E 17410969.40

provide the company with the remaining necessary capital to consummate the Plan and fund its

post-reorganization operations.5

3. Moreover, three of the most active protagonists in these proceedings—the secured

term loan lenders (the “Term Lenders”), the ad hoc equity committee (the “AHEC”), and the ad

hoc trade committee, now consisting solely of Fulcrum Credit Partners, LLP (“Fulcrum”)—each

of which was preparing for a pitched confirmation battle, have now laid down their arms and are

affirmatively supporting the Plan.6

4. Given this momentum, the Debtors are now ready to commence a confirmation

hearing that will not involve the old-fashioned valuation fight that was once anticipated,

notwithstanding one shareholder’s frivolous assertion that the Bankruptcy Code’s cram-down

requirements may apply despite each impaired class’ acceptance of the Plan. As laid out in

detail in this memorandum, the Debtors’ largely consensual Plan fulfills each of sections 1122,

1123, and 1129 of the Bankruptcy Code and therefore should be confirmed.

5 As the Court is aware, the Plan also has a Toggle “B” feature pursuant to which 85 percent of the equity in

Reorganized Visteon would be distributed to the Term Lenders with the remainder to the Note Holders, and with Class H general unsecured creditors receiving the same treatment as under Toggle “A” of the Plan. Now that the capital underlying Toggle “A” of the Plan is poised to be delivered, the Debtors believe that a switch to Toggle “B” is remote at this stage; nevertheless, Toggle “B” represents as an insurance policy to the extent the Note Holders do not follow through on their commitment under the Equity Commitment Agreement.

6 The agreements made with the Term Lenders and AHEC are discussed further in Visteon Corporation’s Status Report on the Fourth Amended Plan of Reorganization [Docket No. 3908]. The Debtors have resolved Fulcrum’s objection through an agreement memorialized in the Plan to pay up to $250,000 of the professional fees and actual, documented out-of-pocket costs of Fulcrum’s counsel, Andrew Kurth LLP.

K&E 17410969.40

II. STATUS OF OBJECTIONS

5. The Debtors received 22 objections to the Plan’s Confirmation, only eleven of

which remain unresolved.7 The remaining objections generally fall into one of three categories:

(a) shareholders’ objections alleging that the Plan’s valuation and resulting recoveries violate the

cram-down and best interests provisions of the Bankruptcy Code; (b) objections asserting that

the Plan’s treatment of Claims and Interests violates the Bankruptcy Code; and (c) objections to

the Plan’s treatment of retiree health and welfare benefits (“OPEB”).8

A. Valuation and Best Interests Test Objections

6. One lone shareholder, Mr. Andrew Shirley (“Shirley”), alleges that the Plan

violates the “fair and equitable” treatment standard (a.k.a. the absolute priority rule) under

7 As of the July 30, 2010 deadline to object to the Plan, the Debtors had received 18 objections. Additional

objections were filed after the July 30 deadline (a) in response to announcement of the agreement executed among the AHEC and the investors under the Equity Commitment Agreement, (b) by a contract counterparty, Arkema Inc., disputing the Debtors’ right to assume its contract, and (c) by two former Visteon employees who participate in non-qualified benefit plans on the basis that the Plan violates 1123(a)(4) of the Bankruptcy Code. Fourteen individual shareholders sent letters (collectively, the “Shareholder Letters”) to the Court or United States Trustee expressing dissatisfaction with the Plan. Certain of the Shareholder Letters requested the appointment of an equity committee or the appointment of an examiner, both of which this Court has already considered and denied. See Order Denying Motion of Various Shareholders for an Order Appointing an Official Committee of Equity Security Holders [Docket No. 3158] and Order Denying Motion of the Ad Hoc Equity Committee in Visteon Corporation for Order Directing the Appointment of Examiner Pursuant to Section 1102(c)(2) of the Bankruptcy Code [Docket No. 3159]. While the Shareholder Letters are not formal objections to the Plan, the Debtors have nonetheless addressed them in their status chart attached hereto as Exhibit B, which identifies each of the objections with a short summary of the substantive basis of the objection and the status of the Debtors’ attempt to resolve that objection. Where applicable, the status chart also summarizes the Debtors’ response to particular objections. To the extent any of the Shareholder Letters raise confirmation objections, the response to such objections will be addressed through the responses to Mr. Andrew Shirley’s and Mr. Mark Taub’s objections.

8 In addition to the three categories listed above, the Debtors received an objection from the Department of Health and Human Services (“HHS”) regarding its executory contracts with the Debtors. The Debtors believe that this objection is not a valid objection to the Plan, and that it stems from a misunderstanding of the executory contract process. In addition, the Debtors have provided HHS with proposed language to add to the Plan intended to address each of the HHS’ concerns. The Debtors’ proposed language can be found in the objection status chart attached hereto as Exhibit B. Although the Debtors have not yet received a response from HHS regarding their proposed resolution as of the time of filing this memorandum, the Debtors are confident that HHS’ objection will be resolved prior to the Confirmation Hearing. The full response to HHS’ objection is found in Section IV.B.5 below.

K&E 17410969.40

section 1129(b) of the Bankruptcy Code. However, the law and the plain language of the

Bankruptcy Code make clear that an individual shareholder cannot raise the “fair and equitable”

treatment standard, or otherwise challenge valuation, as a member of a Class that has accepted

the Plan.9

7. Two other objections, one filed by Shirley and one by another individual

shareholder, Mr. Mark Taub (“Taub”), summarily assert that the Plan violates the best interests

test. The comprehensive liquidation analysis contained in the expert report prepared by

Alvarez & Marsal, attached hereto as Exhibit E (the “Expert Report”), demonstrates that these

shareholders’ simplistic, back of the envelope calculations are off the mark. Simply put, the

recoveries offered under the Plan greatly exceed those that would be available in a complex,

hypothetical chapter 7 liquidation of the Debtors’ Estates.10

B. Disparate Treatment Objections

8. There are also three types of objections—one from a current shareholder, five

from former employees that participated in certain non-qualified benefits programs, and one

from the Office of the United States Trustee (the “United States Trustee”)—that generally allege

that the Plan violates section 1123(a)(4) of the Bankruptcy Code, which requires that Claims in

the same Class receive the same treatment. Each of these objections is without merit.

9 See Pennbank v. Winters (In re Winters), 99 B.R. 658, 663 (Bankr. W.D. Pa. 1989) (“Under the confirmation

standards of § 1129(a), if the requisite majority . . . of creditors in each class have accepted the plan, then the plan need not comply with the absolute priority rule. The absolute priority rule is now applicable only when the proponent of the plan seeks to ‘cram-down’ the plan under the alternative confirmation standard contained in § 1129(b) on a class that is impaired and has rejected the plan.”) (emphasis in original). Several of the Shareholder Letters also contain general allegations that the Plan’s valuation is too low and distributions to equity holders should accordingly be higher. As with Shirley, individual shareholders cannot challenge the Plan’s valuation as a member of a class that has accepted the Plan.

10 See Visteon Corporation, Inc. Best Interest Test Expert Report, attached hereto as Exhibit E.

K&E 17410969.40

9. First, Taub and the United States Trustee objected to the alleged disparate

treatment of Class J Interests as a whole as compared to the treatment of the Interests held by the

AHEC’s members, who have become additional purchasers of the Direct Commitment.11 The

AHEC’s members’ ability to participate in the Direct Commitment, which is otherwise available

to the Note Holders who are party to the Equity Commitment Agreement (the “Investors”), does

not represent treatment of the AHEC’s members’ Interests by the Debtors, but rather an

agreement by the Investors to share a small portion of the Direct Commitment with an organized

group of shareholders poised to launch an attack on the Plan that would have involved great

expense and material delay to the Debtors and risk to their business, as well as material risk to

the Investors’ substantial equity investment. The decision by the Investors to allow the AHEC’s

members to participate in the Direct Commitment was perfectly appropriate and violates no

provision of the Bankruptcy Code. Thus, contrary to Taub’s and the United States Trustee’s

assertions otherwise, the AHEC’s members have not been provided an investment opportunity

by the Debtors on account of their Interests and section 1123(a)(4) is therefore not applicable.12

10. Taub—without filing a motion—also suggests that due to the alleged disparate

treatment of Class J Interests, the AHEC’s members’ votes should be designated—i.e., not

counted—in an effort to create a rejecting class of interest holders and open the door to a full-

11 On August 27, 2010, the date of the filing of this memorandum, the United States Trustee filed a supplemental

objection to the Plan to assert that the treatment of Class J Interests violates section 1123(a)(4). See United States Trustees Supplemental Objection to the Debtors' Fourth Amended Plan of Reorganization [Docket No. 4042].

12 See In re Source Enters., Inc., 392 B.R. 541, 556-57 (S.D.N.Y. 2008) (holding that agreement outside of plan under which unsecured creditor received (i) a right to purchase a portion of the equity in the reorganized debtor from a preferred shareholder/DIP lender, who would be the future 85 percent owner of the reorganized debtor, and (ii) the right to designate one director of the reorganized debtor’s board did not discriminate among unsecured creditors in the same class and therefore did not violate section 1123(a)(4)).

K&E 17410969.40

blown valuation fight. The extraordinarily high standard for vote designation is simply not met

here as the conduct of the AHEC, whose active participation in the case largely was the catalyst

for a meaningful recovery being offered to equity holders at large, hardly equates to the nefarious

activity that might warrant vote designation.

11. Second, five inactive employees allege disparate treatment of their Claims

compared to those of other Class H Claims based on the Debtors’ intention not to continue

certain non-qualified benefit plans for inactive employees upon emergence.13 These objections

are misguided. The Plan provides in crystal clear terms that each and every holder of an allowed

Class H Claim shall receive an identical recovery equal to the lesser of: (a) a 50 percent recovery

on such holder’s Claim or (b) each holder’s pro rata share of $141 million. The Debtors’

decision to amend their non-qualified benefit plans in accordance with those plans’ terms to

eliminate benefits simply is not a Claims’ treatment issue. Whether these objectors will have

allowed Class H Claims on account of such cancelled benefits (which the Debtors believe they

do not have as a matter of non-bankruptcy law) is a Claims reconciliation issue that will be

addressed in the Claims adjudication process, not an issue having anything to do with

Confirmation of the Debtors’ Plan. Therefore, these objections should be overruled.

12. Third, the United States Trustee—without challenging the Plan’s non-Debtor

release provisions themselves—argues that limiting the benefits of these releases to only those

holders of Class F and G Claims and Class J Interests who vote in favor of the Plan violates

section 1123(a)(4) of the Bankruptcy Code. In effect, the United States Trustee suggests that the

13 On August 6, 2010, the Debtors amended the Visteon Corporation Supplemental Executive Retirement Plan

(the “SERP”) and the Visteon Corporation Pension Parity Plan (the “PPP”) to eliminate any accrued benefits in accordance with the terms of the plan documents. As a result, the Debtors do not believe that claims asserted on account of the SERP and PPP will ultimately be allowed.

K&E 17410969.40

release provisions should be expanded in scope to cover all holders of Class F and G Claims and

Class J Interests, irrespective of whether such holders voted in favor of the Plan. The United

States Trustee is mistaken. Section 1123(a)(4) only requires that a plan of reorganization

“provide the same treatment for each claim or interest of a particular class”—not equal treatment

of holders of claims in the same class.14 Under the Plan, the treatment of Claims and Interests,

i.e., recoveries on account of each Claim or Interest, is not affected by whether holders of such

Claims or Interests vote to accept or reject the Plan and therefore section 1123(a)(4) is not

implicated by the Plan’s release provisions.15

C. OPEB Objections

13. Finally, the OPEB objectors claim that the Plan is unconfirmable because (a) the

Debtors terminated OPEB without complying with section 1114(e) of the Bankruptcy Code and

(b) the Plan provides that the reorganized Debtors shall have no liability for OPEB on and after

the Effective Date of the Plan. The first OPEB objection should be overruled because, as this

Court is aware, the Debtors are working diligently on reinstating benefits seamlessly and

retroactively so as to ensure full compliance with section 1114(e). Indeed, this Court recently

denied the OPEB objectors’ motions requesting immediate reinstatement of OPEB and ruled that

14 11 U.S.C. § 1123(a)(4) (emphasis added); In re UNR Indus., Inc., 143 B.R. 506, 523 (Bankr. N.D. Ill. 1992),

rev’d on other grounds, 173 B.R. 149 (N.D. Ill. 1994) (emphasis added); see also In re Adelphia Commc’ns Corp., 368 B.R. 140, 249-250 (Bankr. S.D.N.Y. 2007), aff’d, 544 F.3d 420 (2d Cir. 2008) (finding that “the requirements of section 1123(a)(4) apply only to a plan’s treatment on account of particular claims or interests in a specific class - not the treatment that members of the class may separately receive under a plan on account of the class members’ other rights or contributions.”)(emphasis in original).

15 Adelphia., 368 B.R. at 250 (overruling a section 1123(a)(4) objection because “[a]ll holders of Senior Notes recover on pro rata basis from a single pool of funds, and the recovery on these claims is not conditioned or in any way tied to the releases.”).

K&E 17410969.40

the Debtors were doing all they could to reinstate benefits in compliance with section 1114(e).16

With respect to the second objection, the Debtors have stricken the Plan language concerning the

reorganized Debtors’ liability for OPEB post-emergence upon which the OPEB objectors latched

to challenge confirmation.17 Consistent with the Third Circuit’s ruling on the Debtors’ OPEB

obligations and the requirements of section 1129(a)(13), the Debtors are reserving their rights to

terminate any “unvested” retiree benefits, i.e., those benefits the Debtors have not obligated

themselves to provide, after the Effective Date when section 1114 no longer applies.18

Therefore, these objections are moot.19

14. Thus, Visteon respectfully requests the Court confirm the Plan as it satisfies the

requirements for confirmation and each of the filed objections has either been resolved or lacks

merit.

16 See Hr’g Tr., Aug. 20, 2010, In re Visteon Corp., No. 09-11786, at 98:13–18 (“The evidence is overwhelming,

uncontroverted and extremely competent, that the debtor is doing everything in its power to quickly, efficiently and correctly reinstate the insurance coverage . . . .”).

17 The Debtors have removed the following language from Article IV.P of the Plan: “On and after the Effective Date, and in accordance with applicable law and administrative requirements, the Reorganized Debtors shall have no liability for OPEB and shall have no obligation to provide or offer OPEB to their employees and retirees and their spouses, surviving spouses, dependents or other beneficiaries. The cessation shall be administered on a ‘claims incurred’ basis, and the Reorganized Debtors shall retain responsibility for all claims incurred but either unfiled or unpaid as of the date of cessation of the OPEB.”

18 Specifically, the Debtors added the following language to Article IV.P of the Plan: “The Reorganized Debtors reserve their rights to terminate all OPEB upon the Effective Date and reserve any and all rights and arguments that the factual findings and legal conclusions of the Bankruptcy Court and Federal District Court for the District of Delaware relating to OPEB, to the extent not addressed and reversed by the Third Circuit Court of Appeals, are binding and have res judicata, collateral estoppel and preclusive effect in any proceeding regarding such termination, upon or after the Effective Date.”

19 The right of the Reorganized Debtors to terminate unvested OPEB after the Effective Date was explicitly recognized by this Court and the Third Circuit. As this Court noted at the August 17 hearing, the issue of the Reorganized Debtors’ ability to terminate OPEB pursuant to their non-bankruptcy law rights when section 1114 no longer applies. See Omnibus Hr’g Tr., Aug. 17, 2010, In re Visteon Corp., No. 09-11786, at 46:6-10 (“If there’s an issue on day one, post-bankruptcy about whether or not the debtor can terminate its retiree benefits under state law, that is—that has somebody else’s name written all over it and some other court’s issue written all over it.”)

K&E 17410969.40

III. BACKGROUND

15. On May 28, 2009 (the “Petition Date”), each of the Debtors filed a voluntary

petition for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate

their business and manage their property as debtors in possession pursuant to sections 1107(a)

and 1108 of the Bankruptcy Code. On June 8, 2009, the United States Trustee appointed the

official committee of unsecured creditors (the “Creditors’ Committee”) pursuant to section 1102

of the Bankruptcy Code [Docket No. 178]. These cases are being jointly administered for

procedural purposes.

16. On December 17, 2009, the Debtors filed their first plan of reorganization,20

pursuant to which the Term Lenders would receive approximately 96.2 percent of the equity in

Reorganized Visteon with the remainder going to the Pension Benefit Guaranty Corporation

(“PBGC”) as a result of the contemplated termination of the Debtors’ defined benefit pension

plans. The plan provided no recovery for any other unsecured creditor given that the PBGC’s

pension termination Claims would be structurally senior to the Claims of other unsecured

creditors.

17. After the filing of the December 17 plan, certain of the Note Holders and their

advisors approached the Debtors regarding potential alternative plan proposals predicated on a

substantial rights offering to the Note Holders. While negotiating with the Note Holders, the

20 See Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the

United States Bankruptcy Code [Docket No. 1475]; Disclosure Statement for the Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code[Docket No. 1476]; Debtors’ Motion for Entry of an Order (A) Approving the Adequacy of the Debtors’ Disclosure Statement; (B) Approving Solicitation and Notice Procedures with Respect to Confirmation of the Debtors’ Proposed Plan of Reorganization; (C) Approving the Form of Various Ballots and Notices in Connection Therewith; and (D) Scheduling Certain Dates with Respect Thereto [Docket No. 1477].

K&E 17410969.40

Debtors also pursued parallel negotiations with the Term Lenders over amendments to the

December 17 plan. On March 15, 2010, given the lack of a firm commitment from the Note

Holders, the Debtors amended the December 17 plan to provide for maintenance of the Debtors’

pension plans and an enhanced recovery to unsecured creditors.21

18. The filing of the first amended plan proved to be a catalyst for negotiations with

the Note Holders and on May 7, 2010, the Debtors filed the second amended Plan, incorporating

the toggle feature upon which the current Plan is premised.22 The Debtors subsequently filed

revised forms of the Plan and accompanying disclosure statement on May 24, June 14, June 24,

and June 30.23

19. On June 28, 2010 the Bankruptcy Court approved the Debtors’ fourth amended

disclosure statement (the “Disclosure Statement”) and related solicitation materials (the

21 See First Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the

United States Bankruptcy Code [Docket No. 2544]; Debtors’ First Amended Disclosure Statement for the First Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 2545].

22 See Second Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3011]; Debtors’ Second Amended Disclosure Statement for the Second Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3012].

23 See Third Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3197]; Debtors’ Third Amended Disclosure Statement for the Third Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3198]; Fourth Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3338]; Debtors’ Fourth Amended Disclosure Statement for the Fourth Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3340]; Notice of Filing of Revised Fourth Amended Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3471]; Notice of Filing of Revised Debtors’ Fourth Amended Disclosure Statement for the Fourth Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3472]; Debtors’ Fourth Amended Disclosure Statement for the Fourth Amended Joint Plan of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code [Docket No. 3519].

K&E 17410969.40

“Disclosure Statement Order”).24 And on July 2, 2010, the Debtors began mailing solicitation

materials and soliciting votes on the fourth amended Plan. The deadline to vote on the Plan was

July 30, 2010.

A. Voting Results.

1. Each Impaired Class of Claims and Interests Has Accepted the Plan.

20. The Plan is fully consensual on a Class-by-Class basis as all Classes of Claims

and Interests entitled to vote have accepted the Plan in the requisite amount and number required

by section 1126 of the Bankruptcy Code. Specifically, as evidenced by the Voting

Certification25 filed with the Court, Class E (Term Loan Facility Claims), Class F (7.00% Senior

Notes Claims and 8.25% Senior Notes Claims), Class G (12.25% Senior Notes Claims), and

Class H (General Unsecured Claims) voted in the requisite two-thirds in dollar amount and more

than one-half in number of Claims to accept the Plan, and Class J (Interests in Visteon

Corporation) voted in the requisite two-thirds in number of shares to accept the Plan. The

Voting Certification indicates the following voting results on a consolidated basis:26

24 See Order (A) Approving the Adequacy of the Debtors’ Fourth Amended Disclosure Statement; (B) Approving

Solicitation and Notice Procedures with Respect to Confirmation of the Debtors’ Proposed Fourth Amended Plan of Reorganization; (C) Approving the Form of Various Ballots and Notices in Connection Therewith; and (D) Scheduling Certain Dates with Respect Thereto [Docket No. 3491].

25 See the Affidavit of Christopher R. Schepper With Respect to the Tabulation of Votes on the Fourth Amended Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code, incorporating therein the Declaration of Jane Sullivan of Financial Balloting Group LLC Regarding Voting on, and Tabulation of, Ballots Accepting and Rejecting the Fourth Amended Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code, With Respect to Class E Claims, Senior Notes Clams and Interests, filed on August 16, 2010 [Docket No. 3934] (the “Voting Certification”).

26 Voting Certification, at Ex. B. In addition, all Classes of Claims and Interests at each of the 27 Debtors entities in these Chapter 11 Cases entitled to vote also accepted the Plan.

K&E 17410969.40

Class27 Claim or Interest

Number of Claims

Voting

Accepting Percentagein Number

Amount of Claims or

Interests Voting

Accepting Percentage in

Amount

E Term Loan Facility Claims

146 99.31% $1,470,237,379.94 98.62%

F 7.0% and 8.25% Senior Notes

Claims

291 95.53% $609,667,726.00 99.43%

G 12.25% Senior Notes Claims

45 100.00% $168,784,000.00 100.00%

H General Unsecured Claims

634 84.54% $390,655,104.59 92.17%

J Interests in Visteon

Corporation

N/A N/A 60,806,088.1835 shares

75.77%28

21. In addition, creditors in Class A (ABL Claims), Class B (Secured Tax Claims),

Class C (Other Secured Claims), and Class D (Other Priority Claims) are Unimpaired and

presumed to accept the Plan and, therefore, are not entitled to vote to accept or reject the Plan.

Under the Rights Offering Sub Plan, Creditors in Class E are paid in full in Cash, including

postpetition default interest, and accordingly are Unimpaired and conclusively deemed to accept

the Plan. Creditors in Class I (Intercompany Claims) and Class K (Intercompany Interests) are

Unimpaired and deemed to accept the Plan (to the extent reinstated in the Reorganized Debtors’

discretion) or are Impaired but deemed to accept the Plan (to the extent not reinstated in the

Reorganized Debtors’ discretion), and, in either event, are not entitled to vote to accept or reject

the Plan.29

27 Administrative Claims, Professional Claims, DIP Facility Claims and Priority Tax Claims are not classified

pursuant to section 1123(a)(1) of the Bankruptcy Code and therefore did not vote.

28 In accordance with the Disclosure Statement Order, the Debtors extended the deadline for the members of AHEC to vote to accept or reject the Plan to August 9, 2010.

29 While the Plan also contains Class L for Claims arising out of section 510(b) of the Bankruptcy Code, there are no holders of Claims in Class L and thus no votes cast by holders of Class L Claims.

K&E 17410969.40

B. Modifications to the Plan.

22. Since filing the solicitation version of the fourth amended plan on June 30, 2010,

the Debtors have made certain non-material modifications to the Plan to clarify certain

procedural issues, to reflect recent amendments to the Equity Commitment Agreement, and to

resolve certain confirmation objections. Contemporaneously with the filing of this brief, the

Debtors are filing and serving on the Bankruptcy Rule 2002 notice list and all objectors to the

Plan a “blackline” version of the Plan highlighting changes to the version of the Plan distributed

with the Disclosure Statement and solicitation materials. Modifications to the Plan based on the

requests of objecting parties are also reflected in the objection status chart attached hereto as

Exhibit B. As the Debtors continue to work to resolve remaining objections and clarify certain

non-material issues, certain additional modifications may be reflected in a further amended Plan

filed with the Court or referenced on the record during the Confirmation Hearing.

23. Section 1127(a) of the Bankruptcy Code provides a plan proponent the right to

modify the plan “at any time” before confirmation,30 and section 1127(d) provides that all parties

that previously have accepted the plan also should be deemed to have accepted the modified

plan.31 Courts have allowed plan proponents to make non-material changes to a plan without

30 11 U.S.C. § 1127(a) provides:

The proponent of a plan may modify such plan at any time before confirmation, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of [the] title. After the proponent of a plan files a modification of such plan with the court, the plan as modified becomes the plan.

31 11 U.S.C. § 1127(d) provides:

Any holder of a claim or interest that has accepted or rejected a plan is deemed to have accepted or rejected, as the case may be, such plan as modified, unless, within the time fixed by the court, such holder changes such holder’s previous acceptance or rejection.

K&E 17410969.40

resoliciting the plan for acceptances.32 Moreover, plan proponents need not resolicit votes to

accept or reject a plan from a creditor or shareholder who rejected the plan, even if the plan

materially modifies that party’s treatment under the plan.33

24. In addition to the Plan modifications to resolve objections detailed in Exhibit B,

the Plan was modified to provide clarity on certain Plan processes, settlements, and to address

various administrative issues. For example, Article IV.P was modified to remove a provision

stating the Reorganized Debtors shall have no liability for OPEB and to replace such language

with a reservation of the Reorganized Debtors’ rights with respect to termination of OPEB

obligations after the Effective Date. Articles X.A and X.E were modified to carve out the

AHEC’s members, as additional purchasers under the Equity Commitment Agreement, from the

Plan’s discharge and injunction provisions solely with respect to their participation under the

Equity Commitment Agreement. And Articles I and II.D were modified to reflect that up to

$250,000 of the professional fees and actual, documented out-of-pocket costs of Andrew Kurth

LLP, counsel to the ad hoc trade committee, now consisting solely of Fulcrum, shall be treated as

Administrative Claims, based on Fulcrum’s withdrawal of its objection to the Plan.

32 See, e.g., Enron Corp. v. The New Power Co. (In re The New Power Co.), 438 F.3d 1113, 1117-18 (11th Cir.

2006) (“[T]he bankruptcy court may deem a claim or interest holder’s vote for or against a plan as a corresponding vote in relation to a modified plan unless the modification materially and adversely changes the way that claim or interest holder is treated.”); In re WRN 1301, Inc., No. 06-41381, 2007 WL 1555812, at *4 (Bankr. E.D. Tex. May 24, 2007) (holding resolicitation not required where proposed modification does not adversely and materially impact parties who previously voted for the plan); In re Spiegel, Inc., No. 03-11540, 2005 WL 1278094, at *12 (Bankr. S.D.N.Y. May 25, 2005) (holding that “[c]laimants that have accepted the Plan shall be deemed to have accepted the Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim.”).

33 In re Simplot, No. 06-00002, 2007 WL 2479664, at *13 (Bankr. D. Idaho Aug. 28, 2007) (finding that a creditor who rejected a plan has no standing to object to the modified plan even if that modification is materially adverse to that stakeholder); In re Sweetwater, 57 B.R. 354, 358 (D. Utah 1985) (finding that creditor was not “aggrieved” because it voted to reject the plan, and, therefore, creditor had no standing to object to the plan as modified).

K&E 17410969.40

25. The Debtors submit that all modifications to the Plan are non-material because

they address individual concerns raised by particular holders of Claims or Interests and do not

adversely affect the treatment of those holders who voted to accept the Plan. As a result, the

Debtors are not required to re-solicit for Plan acceptances, and all holders that previously have

accepted the Plan should be deemed to accept the Plan, as modified.34

IV. ARGUMENT

26. This memorandum in support of confirmation is divided into two parts. In the

first part, the Debtors demonstrate that the Plan satisfies the statutory requirements for

confirmation set forth in section 1129 of the Bankruptcy Code. In the second part of the

memorandum, the Debtors address each of the outstanding objections to the Plan’s Confirmation.

Where applicable, the Debtors have noted in the first part of the memorandum the objections that

parties have made to a particular Confirmation requirement, and cross-referenced the second

section of the memorandum containing the Debtors’ response to that objection. In addition, the

Debtors have filed contemporaneously the declarations of Nate Arnett, Senior Director at

Alvarez & Marsal, and William G. Quigley, III, Chief Financial Officer and Executive Vice

President of Visteon Corporation, in support of the Debtors’ Plan and have referenced the

declarations as appropriate throughout the memorandum.35

34 See 11 U.S.C. § 1127(d).

35 See Declaration of William G. Quigley, III, Chief Financial Officer and Executive Vice President of Visteon Corporation, In Support of the Debtors’ Memorandum of Law (I) In Support of Confirmation of the Fifth Amended Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code and (II) In Response to Objections Thereto, attached hereto as Exhibit C(the “Quigley Declaration”) and Declaration of Nate Arnett In Support of the Debtors’ Memorandum of Law (I) In Support of Confirmation of the Fifth Amended Joint Plan of Reorganization of Visteon Corporation and Its Debtor Affiliates Pursuant to Chapter 11 of the United States Bankruptcy Code and (II) In Response to Objections Thereto, attached hereto as Exhibit D (the “Arnett Declaration”).

K&E 17410969.40

A. The Plan Should Be Confirmed.

27. To confirm the Plan, the Court must find that the Debtors have satisfied the

provisions of section 1129 of the Bankruptcy Code by a preponderance of the evidence.36 The

Debtors submit that the Plan complies with all relevant sections of the Bankruptcy Code,

Bankruptcy Rules, and applicable non-bankruptcy law. In particular, the Plan fully complies

with all of the requirements of sections 1122, 1123, and 1129 of the Bankruptcy Code. This

memorandum addresses each requirement individually.

1. The Plan Complies with Section 1129(a)(1) of the Bankruptcy Code.

28. Section 1129(a)(1) of the Bankruptcy Code requires that a plan of reorganization

comply with the applicable provisions of the Bankruptcy Code.37 A principal objective of

section 1129(a)(1) is to ensure compliance with the sections of the Bankruptcy Code governing

classification of claims and interests and the contents of a plan of reorganization.38 Accordingly,

36 See In re Armstrong World Indus., Inc., 348 B.R. 111, 120 (D. Del. 2006); In re Genesis Health Ventures, Inc.,

266 B.R. 591, 616 n. 23 (Bankr. D. Del. 2001); see also Heartland Fed. Sav. & Loan Ass’n v. Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd. II), 994 F.2d 1160, 1165 (5th Cir. 1993) (“[t]he combination of legislative silence, Supreme Court holdings, and the structure of the [Bankruptcy] Code leads this Court to conclude that preponderance of the evidence is the debtor’s appropriate standard of proof under [11 U.S.C.] § 1129(a) . . . .”); In re Bally Total Fitness of Greater N.Y., Inc., No. 07-12395, 2007 WL 2779438, at *3 (Bankr. S.D.N.Y. Sept. 17, 2007) (“the Debtors, as proponents of the Plan, have the burden of proving the satisfaction of the elements of Sections 1129(a) . . . of the Bankruptcy Code by a preponderance of the evidence.”); In re Mirant Corp., No. 03-46590, 2007 WL 2753277, at *1 (Bankr. N.D. Tex. Sept. 19, 2007) (applying preponderance of the evidence standard to confirmation); In re El Charro, Inc., No. 05-60294, 2007 WL 2174911, *3-4 n. 4 (Bankr. D. Kan. July 26, 2007) (preponderance of evidence applies to valuation and every element governing confirmation).

37 11 U.S.C. § 1129(a)(1).

38 See Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 648-49 (2d Cir. 1988) (suggesting that Congress intended the phrase “‘applicable provisions’ in this subsection to mean provisions of Chapter 11 . . . such as section 1122 and 1123.”); In re Drexel Burnham Lambert Grp., Inc., 138 B.R. 723, 757 (Bankr. S.D.N.Y. 1992) (noting that “[t]he legislative history of § 1129(a)(1) explains that this provision embodies the requirements of §§ 1122 and 1123, respectively, governing classification of claims and the contents of the Plan.”); see also In re Mirant Corp., No. 03-46590, 2007 WL 1258932, at *7 (Bankr. N.D. Tex. Apr. 27, 2007) (objective of 1129(a)(1) is to assure compliance with the sections of the Bankruptcy Code governing classification and the contents of a plan reorganization).

K&E 17410969.40

the determination of whether the Plan complies with section 1129(a)(1) requires an analysis of

sections 1122 and 1123 of the Bankruptcy Code, which respectively address classification and

plan content issues. As explained below, the Plan complies with sections 1122 and 1123 in all

respects.

a. The Plan Satisfies the Classification Requirements of Section 1122 of the Bankruptcy Code.39

29. Section 1122 requires that Claims placed in the same Class be substantially

similar.40 Courts have also interpreted section 1122 to prohibit separate classification of similar

claims if such classification is intended to gerrymander voting results and lacks a legitimate

business justification. 41

30. The Plan complies with section 1122, as each Class contains substantially similar

Claims and each Class of Claims and Interests differs from each other Class in either a legal or

factual nature such that classification has not been used for gerrymandering purposes.42

Notably, no party has challenged the Plan’s classification scheme.43

39 See Quigley Decl. at ¶ 13.

40 11 U.S.C. § 1122(a) (“Except as provided in subsection (b) of this section, a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.”).

41 See Aetna Cas. & Sur. Co. v. Clerk, U.S. Bankr. Ct., N.Y. (Chateaugay), 89 F.3d 942, 949-50 (2d Cir. 1996) (“Congress gave reorganizing debtors considerable flexibility in their treatment of general unsecured creditors to position themselves for future economic viability.”); In re Greate Bay Hotel & Casino, Inc., 251 B.R. 213, 224 (Bankr. D.N.J. 2000) (separate classification of similar claims permitted when classification “promotes the rehabilitative goals of Chapter 11.”); In re 11,111, Inc., 117 B.R. 471, 476 (Bankr. D. Minn. 1990) (same).

42 Courts have identified grounds justifying separate classification, including: (a) where members of a class possess different legal rights; and (b) where there are good business reasons for separate classification. SeeJohn Hancock Mut. Life Ins. Co. v. Route 37 Bus. Park Assocs., 987 F.2d 154, 158–59 (3d Cir. 1993) (as long as each class represents a voting interest that is “sufficiently distinct and weighty to merit a separate voice in the decision whether the proposed reorganization should proceed,” the classification is proper); In re Jersey City Med. Ctr., 817 F.2d 1055, 1060–61 (3d Cir. 1987) (recognizing that separate classes of claims must be reasonable and allowing a plan proponent to group similar claims in difference classes); see also Frito-Lay, Inc.,

K&E 17410969.40

31. Here, the Plan separately classifies Claims arising from the Debtors’ secured debt

facilities in Class A (ABL Claims) and Class E (Term Loan Facility Claims).44 The Plan also

separately classifies three unsecured Creditor groups—Class F (7.00% Senior Notes Claims and

8.25% Senior Notes Claims), Class G (12.25% Senior Notes Claims), and Class H (General

Unsecured Creditors)—based on the nature of their Claims, the different legal rights and

expectations of such claimants, and the claimants’ respective roles in the Debtors’ business

going-forward. In particular, holders of the 12.25% Senior Notes Claims are structurally senior

to other unsecured Creditors based on guarantees from Visteon Corporation’s wholly-owned

domestic operating subsidiaries (the “Domestic Subsidiary Guarantees”). The Plan accordingly

provides holders of Class G Claims additional consideration on account of the Domestic

Subsidiary Guarantees in the form of warrants to purchase New Visteon Common Stock on

terms described in the Warrant Agreement.

32. The separate classification of the Class F and Class H Claims is supported by the

claimants’ different present expectations and positions in the Debtors’ future operations and debt

structure. The Note Holders, which hold Class F Claims, made significant long-term

investments in the Debtors prior to the commencement of these Chapter 11 Cases, and certain of

v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 956-57 (2d Cir. 1993) (finding separate classification appropriate because classification scheme had a rational basis); In re Heritage Org., L.L.C., 375 B.R. 230, 303 (Bankr. N.D. Tex. 2007) (stating that “the only express prohibition on separate classification is that it may not be done to gerrymander an affirmative vote on a reorganization plan.”); Greate Bay 251 B.R. at 232 (“[I]t is generally recognized that trade creditors have short-term maturities; debenture holders have long-term expectations. Correspondingly, in this case, the trade creditors are receiving an immediate cash payout, while the Old Note-holders are receiving a package of securities that conform to prepetition long-term expectations.”).

43 Fulcrum’s initial objection to separate classification of Class F and H Claims has been resolved and withdrawn. See Notice of Withdrawal of Fulcrum’s Amended Objection to Confirmation [Docket No. 4020].

44 See Plan Art. III.B. See also, In re Bugg, 172 B.R. 781, 784 (E.D. Pa. 1994) (“Courts have consistently held as a matter of law that secured creditors on different pieces of property are not similar [for classification purposes].”).

K&E 17410969.40

the Note Holders have subscribed to the Rights Offering and will receive a package of securities

(i.e., New Visteon Common Stock and the right to participate in the Rights Offering) on account

of their Claims. Conversely, holders of Class H Claims, many of which are trade creditors,

generally received cash payments to satisfy the amounts owed for the goods and services they

provided to the Debtors prepetition. Accordingly, under the Plan, holders of Allowed Class H

Claims will receive, in cash, the lesser of their pro rata portion of $141 million or 50 percent of

the amount of their Claim, thus satisfying their original expectations of a cash payment for the

goods and services they provided to the Debtors.45

33. As such, each Class is composed of substantially similar Claims or Interests and

each instance of separate classification of similar Claims was based on valid business, factual,

and legal reasons. Thus, the Plan satisfies section 1122 of the Bankruptcy Code, and there are no

outstanding objections asserting otherwise.

b. The Plan Satisfies the Seven Mandatory Plan Requirements of Sections 1123(a)(1) - (a)(7) of the Bankruptcy Code.

34. The Plan meets the seven mandatory requirements of section 1123(a).

Specifically, sections 1123(a)(1)-(7) require that a plan:

(1) designate classes of claims and interests, with certain exceptions;

(2) specify unimpaired classes of claims and interests;

(3) specify the treatment of impaired classes of claims and interests;

45 Based on the Debtors’ corporate structure as described in the Disclosure Statement, to the extent a Class H

Claim is held against Visteon International Holdings, Inc., the holder shall receive Cash equal to the lesser of its Pro Rata portion of $20.0 million or 100% of the amount of such holder’s Claim.

K&E 17410969.40

(4) provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim agrees to a less favorable treatment of its particular claim or interest;

(5) provide adequate means for the plan’s implementation;

(6) provide for the prohibition in the charter of issuance of nonvoting equity securities and provide an appropriate distribution of voting power among the classes of securities; and

(7) contain only provisions that are consistent with the interests of the creditors and equity security holders and with public policy with respect to the manner of selection of the reorganized company’s officers and directors.46

i. The Plan Designates Classes of Claims and Interests (Section 1123(a)(1)).

35. The Plan satisfies the first requirement of section 1123(a) by designating Classes

of Claims and Interests, subject to the exceptions listed under this provision—i.e., Administrative

Claims, DIP Facility Claims, Professional Claims, and Priority Tax Claims are not classified.47

ii. The Plan Specifies Unimpaired Classes of Claims and Interests (Section 1123(a)(2)).

36. The Plan satisfies the second requirement of section 1123(a) by specifying the

Classes of Claims and Interests that are Unimpaired under the Plan.48

iii. The Plan Specifies the Treatment of Impaired Classes of Claims and Interests (Section 1123(a)(3)).

37. The Plan satisfies the third requirement of section 1123(a) by specifying the

treatment of each Class of Claims and Interests that is Impaired.49

46 See 11 U.S.C. § 1123(a)(1)-(7).

47 See Plan Art. III.B.

48 See id.

K&E 17410969.40

iv. The Plan Provides the Same Treatment for Each Claim or Interest in a Particular Class (Section 1123(a)(4)).

38. The Plan also satisfies section 1123(a)(4)—the fourth requirement of section

1123—because the treatment of each Claim or Interest within a Class is the “same” as the

treatment of each other Claim or Interest in that Class, unless the holder of a Claim or Interest

agrees to less favorable treatment on account of its Claim or Interest.50 In analyzing section

1123(a)(4)’s requirements, courts have held that “the same” does not mean “identical” and the

real inquiry is whether the claimants receive treatment that is approximately equivalent.51 In this

instance, the only holders of Claims in the same Class that are provided with different treatment

are the Eligible Holders as compared to the Non-Eligible Holders in Class F and Class G. This

difference in treatment is minimal and is the functional economic equivalent for such Claims,

and thus eminently reasonable under the circumstances.52

49 See Plan Art. III.C.

50 See id. Taub and the United States Trustee objected to the Plan alleging that it violates section 1123(a)(4) by providing different treatment to holders of Class J Interests as compared to the treatment provided to members of the AHEC on account of their Class J Interests. The United States Trustee also objected to the Plan on the basis that providing a release to Creditors who vote in favor of the Plan is a violation of section 1123(a)(4) of the Bankruptcy Code. The Debtors’ response to these objections is contained in Section IV.B.3.a below.

51 Ad Hoc Comm. of Pers. Injury Asbestos Claimants v. Dana Corp. (In re Dana Corp.), 412 B.R. 53, 61 (Bankr. S.D.N.Y. 2008) (concluding that claims in the same class receiving different treatment on account of settlement agreements with the debtors did not violate 1123(a)(4)); see also In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 749 (2d Cir. 1992), modified on reh’g, 993 F.2d 7 (2d Cir. 1993) (noting that “some classification of claimants within a class is permissible” in case with a class of asbestos claimants that the debtors stratified based on the nature and strength of the underlying claims); In re AOV Indus. Inc., 792 F.2d 1140, 1154 (D.C. Cir. 1986) (“We do not hold that all class members must be treated precisely the same in all respects.”); The Finova Grp. V. BNP Paribas (In re Finova Grp., Inc.), 304 B.R. 630, 637 (D. Del. 2004) (“The requirements of Section 1123 do not require the parties to receive equal payment … .”); In re Quigley Co., 377 B.R.