What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 448 added, 379 removed, 637 unchanged (56% of the section changed)

2 unchanged sentences

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions, except per share amounts)

Net sales (Note 4)

$ 839 $ 804 $ 2,771 $ 2,026

Cost of goods sold 676 657 2,219 1,661

Gross profit 163 147 552 365

Selling, general and administrative expenses 60 98 166 202

3 unchanged sentences

Reorganization items, net (Note 2)

( 9 ) 4 ( 130 ) 4

Income before taxes 91 10 449 65

Tax expense (Note 7)

Net income (loss)

28 ( 1 ) 82 11

Net income 63 11 367 54

preferred dividend (Note 18)

Net income (loss) available to common shareholders

Earnings income (loss) per common share

( 36 ) — ( 60 ) —

Net income available to common shareholders $ 27 $ 11 $ 307 $ 54

Earnings per common share

Basic $ 0.42 $ 0.15 $ 4.34 $ 0.72

Diluted $ 0.20 $ 0.14 $ 1.75 $ 0.71

Weighted average common shares outstanding

Basic 65,056,274 75,739,152 70,802,999 75,456,358

Diluted 312,844,469 75,943,994 209,664,275 76,123,548

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

GARRETT MOTION INC.

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions)

Net income (loss)

Net income $ 63 $ 11 $ 367 $ 54

Foreign exchange translation adjustment ( 6 ) ( 100 ) 37 ( 111 )

Changes in fair value of effective cash flow hedges,

net of tax (Note 17)

Changes in fair value of effective cash flow hedges, net of tax (Note 17)

Changes in fair value of net investment hedges, net of tax 12 ( 6 ) 27 ( 8 )

Total other comprehensive (loss) income, net of tax

Total other comprehensive income (loss) , net of tax 8 ( 106 ) 71 ( 119 )

Comprehensive income (loss) $ 71 $ ( 95 ) $ 438 $ ( 65 )

2 unchanged sentences

CONSOLIDATED INTERIM BALANCE SHEETS

September 30,

2021 December 31,

(Dollars in millions)

8 unchanged sentences

Property, plant and equipment – net 472 505

Goodwill 193 193

Deferred income taxes 253 275

Other assets (Note 11)

Total assets $ 2,717 $ 3,017

Current liabilities:

16 unchanged sentences

Series A Preferred Stock, par value $ 0.001 ;

247,768,962 shares issued and outstanding as of June 30, 2021 (Note 18)

247,757,290 shares issued and outstanding as of September 30, 2021 (Note 18)

Common Stock, par value $ 0.001 ;

1,000,000,000 and 400,000,000 shares authorized, 65,050,367 and 76,229,578 issued and 65,050,367 and 75,813,634 outstanding as of June 30, 2021 and December 31, 2020, respectively (Note 18)

1,000,000,000 and 400,000,000 shares authorized, 65,062,181 and 76,229,578 issued and 65,062,181 and 75,813,634 outstanding as of September 30, 2021 and December 31, 2020, respectively (Note 18)

Additional paid–in capital 1,334 28

1 unchanged sentence

Accumulated other comprehensive loss (Note 19)

( 58 ) ( 129 )

Total deficit ( 633 ) ( 2,308 )

3 unchanged sentences

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(Dollars in millions)

Cash flows from operating activities:

Net income $ 367 $ 54

Adjustments to reconcile net income to net cash provided by operating activities:

1 unchanged sentence

Deferred income taxes 10 ( 25 )

Amortization of deferred financing costs

Depreciation 70 60

Accretion and amortization of debt discount and deferred financing costs

Foreign exchange loss 7 ( 15 )

1 unchanged sentence

Pension expense ( 1 ) 1

Other ( 3 ) 9

Changes in assets and liabilities:

Accounts, notes and other receivables 48 ( 35 )

Inventories ( 59 ) ( 26 )

Other assets 40 ( 54 )

Accounts payable ( 161 ) ( 126 )

16 unchanged sentences

Debtor-in-possession financing fees — ( 4 )

Other — ( 3 )

Net cash provided by financing activities $ 362 $ 340

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 2 ) 3

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Net (decrease) increase in cash, cash equivalents and restricted cash ( 159 ) 128

Cash, cash equivalents and restricted cash at beginning of the period 693 187

Cash, cash equivalents and restricted cash at end of the period $ 534 $ 315

Supplemental cash flow disclosure:

3 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Issuance of Mandatorily redeemable Series B Preferred Stock

Issuance of Series B Preferred Stock 577 —

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement

1 unchanged sentence

CONSOLIDATED INTERIM STATEMENTS OF EQUITY (DEFICIT)

Preferred Stock

Preferred Stock Common Stock Additional

Capital Retained

Deficit Accumulated

Comprehensive

Income/(Loss)

Income/(Loss) Total

Shares Amount Shares Amount

(in millions)

Balance at December 31, 2019

Other comprehensive income,

— — 75 — $ 19 $ ( 2,282 ) $ 130 $ ( 2,133 )

Net income — — — — — 52 — 52

Other comprehensive income, net of tax

— — — — — — 39 39

Stock-based compensation — — — — 2 — — 2

Tax withholding related to vesting of

restricted stock units and other

Adoption impact of ASU 2016-13,

Financial Instruments -

Credit Losses

Tax withholding related to vesting of restricted stock units and other

— — — — ( 1 ) — — ( 1 )

Adoption impact of ASU 2016-13 , Financial Instruments - Credit Losses

— — — — — ( 5 ) — ( 5 )

Balance at March 31, 2020

— — 75 — $ 20 $ ( 2,235 ) $ 169 $ ( 2,046 )

Net loss — — — — — ( 9 ) — ( 9 )

Other comprehensive loss, net of tax — — — — — — ( 52 ) ( 52 )

1 unchanged sentence

Balance at June 30, 2020

— — 75 — $ 24 $ ( 2,244 ) $ 117 $ ( 2,103 )

Net income — — — — — 11 — 11

Other comprehensive loss, net of tax — — — — — — ( 106 ) ( 106 )

Stock-based compensation — — — — 2 — — 2

Balance at September 30, 2020

— — 75 — $ 26 $ ( 2,233 ) $ 11 $ ( 2,196 )

Balance at December 31, 2020

— — 76 — 28 ( 2,207 ) ( 129 ) ( 2,308 )

Net loss — — — — — ( 105 ) — ( 105 )

Other comprehensive income, net of tax — — — — — — 111 111

1 unchanged sentence

Balance at March 31, 2021

— — 76 — $ 30 $ ( 2,312 ) $ ( 18 ) $ ( 2,300 )

Net income — — — — — 409 — 409

Cash-Out election — — ( 11 ) — — ( 69 ) — ( 69 )

3 unchanged sentences

Balance at June 30, 2021

248 — 65 — $ 1,332 $ ( 1,972 ) $ ( 66 ) $ ( 706 )

Net income — — — — — 63 — 63

Other comprehensive income, net of tax — — — — — — 8 8

Stock-based compensation — — — — 2 — — 2

Balance at September 30, 2021

248 — 65 — $ 1,334 $ ( 1,909 ) $ ( 58 ) $ ( 633 )

The Notes to the Consolidated Interim Financial Statements are an integral part of this statement.

6 unchanged sentences

These OEMs in turn ship to consumers globally.

We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and electric (hybrid and fuel cell) powertrains.

We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and electric (hybrid and fuel cell) power trains.

These products are key enablers for fuel economy and emission standards compliance.

1 unchanged sentence

On September 20, 2020 (the “Petition Date”), the Company and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).

The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) are being jointly administered under the caption “In re:

The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption “In re:

Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Revised Amended Plan of Reorganization (the “Plan”).

On April 26, 2021, the Bankruptcy Court entered an order (the “Confirmation Order”) among other things, confirming the Plan.

On April 30, 2021 (the “Effective Date”), the conditions to effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

On April 30, 2021 (the “Effective Date”), the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

See Note 2, Plan of Reorganization , for further details.

Basis of Presentation

The Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The accompanying Consolidated Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

All amounts presented are in millions, except per share amounts.

2 unchanged sentences

As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities were subject to uncertainty.

While we were operating as debtors-in-possession under the Bankruptcy Code, we have sold or otherwise disposed of or liquidated assets or settled liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in our Consolidated Interim Financial Statements.

As a result of our improved liquidity (See notes 2, 15, 16 and 18) , and removal of the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt no longer exists that we will be able to continue as a going concern.

Upon emergence from the Chapter 11 bankruptcy proceedings, the Company did not meet the requirements under ASC 852 for fresh start accounting.

While the Company was operating as debtors-in-possession under the Bankruptcy Code, we have sold or otherwise disposed of or liquidated assets or settled liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business, for amounts other than those reflected in our Consolidated Interim Financial Statements.

As a result of our improved liquidity (see Note 2, Plan of Reorganization ;

Note 15, Long-term Debt and Credit Agreements ;

Note 16, Mandatorily Redeemable Series B Preferred Stock ;

and Note 18, Equity ) , and removal of the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt no longer exists that we will be able to continue as a going concern.

Upon emergence from the Chapter 11 bankruptcy proceedings, the Company did not meet the requirements under Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”) for fresh start accounting.

Fresh start accounting is applicable if both of the following criteria are met:

7 unchanged sentences

In addition, the balance sheet distinguished pre-petition liabilities subject to compromise from those pre-petition liabilities that were not subject to compromise and post-petition liabilities.

Pre-petition liabilities that were not fully secured or those that have at least a possibility of not being repaid at the allowed claim amount were classified as liabilities subject to compromise on the Consolidated Interim Balance Sheet at December 31, 2020.

Pre-petition liabilities that were not fully secured or those that had at least a possibility of not being repaid at the allowed claim amount were classified as liabilities subject to compromise on the Consolidated Balance Sheet at December 31, 2020.

The Consolidated Interim Financial Statements are unaudited;

2 unchanged sentences

The Consolidated Interim Financial Statements should be read in conjunction with the audited annual Consolidated and Combined Financial Statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 16, 2021 (our “2020 Form 10-K”).

The results of operations for the three and six months ended June 30, 2021 and cash flows for the six months ended June 30, 2021 should not necessarily be taken as indicative of the entire year.

The results of operations for the three and nine months ended September 30, 2021 and cash flows for the nine months ended September 30, 2021 should not necessarily be taken as indicative of the entire year.

We report our quarterly financial information using a calendar convention:

the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30.

It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes.

It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday to minimize the potentially disruptive effects of quarterly closing on our business processes.

The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year.

For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results, such differences have been adjusted for the three months ended June 30, 2021.

Our actual closing dates for the three months ended June 30, 2021 and 2020 were July 3, 2021 and June 27, 2020, respectively.

Our actual closing dates for the three months ended September 30, 2021 and 2020 were October 2, 2021 and September 26, 2020, respectively.

The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management bases these estimates on assumptions that it believes to be reasonable under the circumstances, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business due to various global macroeconomic, operational and supply chain risks as a result of COVID-19.

Management bases these estimates on assumptions that it believes to be reasonable under the circumstances, including considerations for the impact of the outbreak of the COVID-19 pandemic on the Company's business due to various global macroeconomic, operational and supply-chain risks as a result of COVID-19.

Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

4 unchanged sentences

On April 26, 2021, the Bankruptcy Court entered the Confirmation Order among other things, confirming the Plan.

On the Effective Date, April 30, 2021, the conditions to effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

On the Effective Date, April 30, 2021, the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

On the Effective Date, pursuant to the Plan:

4 unchanged sentences

• The Company issued 834,800,000 shares of its new mandatorily redeemable series B preferred stock (the “Series B Preferred Stock”) to Honeywell International Inc.

(“Honeywell”) in satisfaction and discharge of certain claims of Honeywell, which shares are to be redeemed in installments of $ 35 million in 2022 and $ 100 million annually in 2023-2030;

(“Honeywell”) in satisfaction and discharge of certain claims of Honeywell;

• The Company also paid $ 375 million to Honeywell in addition to the issuance of the Series B Preferred Stock in satisfaction and discharge of certain claims of Honeywell;

The Company was authorized to grant up to 10 % of the equity in the reorganized Company (on a fully-diluted basis) from time to time to the directors, officers and other employees of the reorganized Company;

• The Company was authorized to grant up to 10 % of the equity in the reorganized Company (on a fully-diluted basis) from time to time to the directors, officers and other employees of the reorganized Company, for awards under the Garrett Motion Inc.

2021 Long-Term Incentive Plan adopted by the board of directors (the “Board”) on May 25, 2021;

• The Company paid in full $ 101 million of interest and principal outstanding on, and terminated, that certain Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “Debtor-in-possession Term Loan”);

6 unchanged sentences

◦ The Company repaid its accrued pre-petition hedge obligations of $ 20 million;

The obligations of the Debtors under that certain Indenture, dated as of September 27, 2018, among the Company, as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, as may be amended, supplemented or otherwise modified from time to time (the “Indenture”), were cancelled, the applicable agreements governing such obligations were terminated and holders of Allowed Pre-petition Credit Agreement Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Senior Subordinated Noteholder Claims (as defined in the Plan).

• The obligations of the Debtors under that certain Indenture, dated as of September 27, 2018, among the Company, as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, as may be amended, supplemented or otherwise modified from time to time (the “Indenture”), were cancelled, the applicable agreements governing such obligations were terminated and holders of Allowed Pre-petition Credit Agreement

Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Senior Subordinated Noteholder Claims (as defined in the Plan).

With respect to the Indenture and the Allowed Senior Subordinated Noteholder Claims, the Company repaid its outstanding principal balance of € 350 million, or $ 423 million, (the “Senior Notes”), accrued pre-petition interest of $ 10 million, post-petition interest of $ 13 million, and payment of $ 15 million in connection with the complaint in the Bankruptcy Court against the indenture trustee (the “Indenture Trustee”) of the 5.125 % senior notes due 2026 (the “Senior Notes”) seeking declaratory judgment on two claims for relief that the Debtors did not owe, and the holders of the Senior Notes (the “Noteholders”) were not entitled to, any make-whole premium under the Indenture (the “Make-Whole” and such litigation, the “Make-Whole Litigation”);

• The Company and certain of its subsidiaries entered into secured debt facilities consisting of:

1 unchanged sentence

Dollar term loan facility in the amount of $ 715 million (the “Dollar Facility”);

a seven-year secured first-lien Euro Dollar term loan facility in the amount of € 450 million (the “Euro Facility”), and together with the Dollar Facility, the “Term Loan Facilities”);

a five-year senior secured first-lien revolving credit facility in the amount of $ 300 million providing for multi-currency revolving loans, (the “Revolving Facility”) and.

together with the Term Loan Facilities, (the “Credit Facilities”);

The Com pany obtained a $ 35 million letter of credit facility for a term of five years with BNP Paribas;

◦ a seven-year secured first-lien Euro term loan facility in the amount of € 450 million (the “Euro Facility,” and together with the Dollar Facility, the “Term Loan Facilities”);

◦ a five-year senior secured first-lien revolving credit facility in the amount of $ 300 million providing for multi-currency revolving loans, (the “Revolving Facility,” and together with the Term Loan Facilities, the “Credit Facilities”);

• The proceeds drawn under the Credit Facilities were reduced by deferred financing costs of $ 38 million, and deferred financing costs of $ 25 million on repaid historical debt were expensed;

3 unchanged sentences

See Note 15, Long-term Debt and Credit Agreements for further discussion of the Credit Facilities.

See note 22, Commitments and Contingencies for further discussion of obligations payable to Honeywell.

Reorganization Items, Net

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of the following for the three and six months ended June 30, 2021:

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of the following for the three and nine months ended September 30, 2021:

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions)

Gain on settlement of Honeywell claims (1)

$ — $ ( 502 )

Advisor fees ( 8 ) 172

Director's and officers insurance — 39

4 unchanged sentences

Bid termination and expense reimbursement — 79

Other ( 1 ) 15

Total reorganization items, net $ ( 9 ) $ ( 130 )

1 unchanged sentence

(2) Includes $ 15 million in connection with Make-Whole Litigation and $ 13 million related to post-petition interest.

There were no charges for reorganization items recorded in the statement of operations for the three and six months ended June 30, 2020.

There was $ 4 million recorded to Reorganization items, net in the Consolidated Interim Statement of Operations for the three and nine months ended September 30, 2020.

Exit Financing and Entry into Credit Facilities

2 unchanged sentences

Dollar term loan facility in the amount of $ 715 million ;

a seven-year secured first-lien Euro Dollar term loan facility in the amount of € 450 million;

• a seven-year secured first-lien Euro term loan facility in the amount of € 450 million;

• a five-year senior secured first-lien Revolving Facility in the amount of $ 300 million providing for multi-currency revolving loans.

The Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to Swiss Borrower or any of its subsidiaries.

The Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to the Swiss Borrower (as defined below) or any of its subsidiaries.

Letters of credit are available for issuance under the Credit Agreement on terms and conditions customary for financings of this kind, which issuances will reduce availability under the Revolving Facility.

The proceeds of the Term Loan Facilities were used on the Effective Date (i) for the payment of fees and expenses payable in connection with entry into the Credit Agreement, the effectiveness of the Plan, the refinancing of the Company’s existing indebtedness and the preferred equity investments that were made on the Effective Date, (ii) to fund distributions in accordance with the Plan, (iii) to payoff the Company’s existing indebtedness, including under its Pre-petition Credit Agreement, notes indenture and Debtor-in-possession Term Loan and (iv) for general corporate purposes.

The proceeds of the Term Loan Facilities were used on the Effective Date (i) for the payment of fees and expenses payable in connection with entry into the Credit Agreement, the effectiveness of the Plan, the refinancing of the Company’s existing indebtedness and the preferred equity investments that were made on the Effective Date, (ii) to fund distributions in accordance with the Plan, (iii) to pay off the Company’s existing indebtedness, including under its pre-petition Credit Agreement, notes indenture and Debtor-in-possession Term Loan and (iv) for general corporate purposes.

The Revolving Facility was undrawn on the Effective Date.

3 unchanged sentences

financing (2)

June 30, 2021

September 30, 2021

(Dollars in millions)

Secured Term Loan Facilities and

accrued interest

Secured Term Loan Facilities and accrued interest

$ 1,082 $ 21 $ ( 1,103 ) $ — $ —

Borrowings under Old Revolving Facility 370 4 ( 374 ) — —

3 unchanged sentences

Total long-term debt $ 2,081 $ 57 $ ( 2,138 ) $ 1,200 $ 1,200

(1) Amounts primarily are related to accrued interest, unamortized deferred financing cost as of December 31, 2020 and impact of foreign exchange.

Exit financing amounts as of the Effective Date of $ 1,221 million were adjusted to June 30, 2021 foreign exchange rate and

reflect amortization of deferred financing costs.

(1) Amounts primarily are related to accrued interest, unamortized deferred financing cost as of December 31, 2020 and the impact of foreign exchange.

(2) Exit financing amounts as of the Effective Date of $ 1,221 million were adjusted to September 30, 2021 foreign exchange rate and reflect the amortization of deferred financing costs.

Financial Statement Classification of Liabilities Subject to Compromise

4 unchanged sentences

Among other things, the Bankruptcy Court authorized, but did not require, the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes, critical vendors and foreign vendors.

The amounts classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determination of secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims or other events.

The amounts classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, the determination of the secured status of certain claims, the determination as to the value of any collateral securing claims, proof of claims or other events.

Prior to emergence, pre-petition liabilities that were subject to compromise were required to be reported at the amounts expected to be allowed.

1 unchanged sentence

Upon emergence or shortly thereafter, amounts recorded as liabilities subject to compromise were either settled, as reflected in the table below or such amounts have been reinstated to current or non-current liabilities in the Condensed Consolidated Balance Sheet, based upon management’s judgment as to the timing for settlement of such claims.

The following table presents liabilities subject to compromise as reported in the Consolidated Interim Balance Sheet at June 30, 2021 and December 31, 2020, respectively:

Reinstatements

Reorganization

The following table presents the movements in the liabilities subject to compromise as reported in the Consolidated Balance Sheet from December 31, 2020 to September 30, 2021:

2020 Change in

Reinstatements Reorganization OCI September 30,

(Dollars in millions)

Obligations payable to

Honeywell (Note 22)

Senior Notes (Note 15)

Pension, compensation,

benefit and other

employee related

Uncertain tax positions and

deferred taxes

Obligations payable to Honeywell

$ 1,482 $ ( 23 ) $ ( 375 ) $ ( 577 ) $ — $ ( 502 ) $ ( 5 ) $ —

Senior Notes 429 32 ( 461 ) — — — — —

Pension, compensation, benefit and other employee-related

92 ( 10 ) — — ( 82 ) — — —

Uncertain tax positions and deferred taxes

69 ( 8 ) — ( 61 ) — — —

Accounts payable 82 ( 50 ) — — ( 32 ) — — —

Advanced discounts from

Advanced discounts from suppliers

33 ( 6 ) — — ( 27 ) — — —

Lease liabilities (Note 14)

Product warranties and

performance guarantees

19 ( 2 ) — — ( 17 ) — — —

Product warranties and performance guarantees

16 — — — ( 16 ) — — —

Freight Accrual 27 ( 27 ) — — — — — —

Total liabilities subject

to compromise

As discussed above, the Confirmation Order has been entered, the Company emerged on the Effective Date of April 30, 2021.

Other 41 ( 14 ) — — ( 27 ) — — —

Total liabilities subject to compromise

$ 2,290 $ ( 108 ) $ ( 836 ) $ ( 577 ) $ ( 262 ) $ ( 502 ) $ ( 5 ) $ —

As discussed above, the Confirmation Order has been entered, the Company emerged from Chapter 11 bankruptcy on the Effective Date of April 30, 2021.

The amounts in the table above represent the best estimate of our pre-petition liabilities prior to emergence on the Effective Date.

1 unchanged sentence

The accounting policies of the Company are set forth in Note 3 to the audited annual Consolidated and Combined Financial Statements for the year ended December 31, 2020 included in our 2020 Form 10-K.

There were no new accounting pronouncements adopted during the six months ended June 30, 2021.

Restricted Cash

Upon emergence from bankruptcy, the Company has classified $ 85 million of funds designated to pay advisor fees related to the bankruptcy proceedings as Restricted cash.

The remaining balance primarily consists of bank deposits used to pledge as collateral in order to be able to issue bank notes as payment to certain suppliers in the Asia Pacific region (refer to note 9, Factoring and Notes Receivable).

There were no new accounting pronouncements adopted during the nine months ended September 30, 2021.

Related Party Transactions

We lease certain facilities and receive property maintenance services from Honeywell, which as of emergence from Chapter 11 is the owner of our Series B Preferred Stock and appoints a Director to the Board.

Lease and service agreements were made at commercial terms prevalent in the market at the time they were executed.

Our payments under the agreements with Honeywell were $ 2 million and $ 4 million for the three and six months ended June 30, 2021, respectively and were included in Cost of goods sold in our Consolidated Interim Statements of Operations.

Related to the agreements with Honeywell, our Consolidated Interim Balance Sheets includes liabilities of $ 15 million as of June 30, 2021, respectively.

Liability balances are primarily related to lease contracts of $ 13 million as of June 30, 2021.

During the three and six months ended June 30, 2021, certain of our related parties participated in our Plan as follows, as more fully discussed in Note 2, Plan of Reorganization and Note 18, Equity:

We reimbursed Centerbridge and Oaktree, who are significant shareholders, and Honeywell for professional fees and expenses related to their support of our emergence from Chapter 11 bankruptcy;

Our payments under the agreements with Honeywell were $ 2 million and $ 6 million for the three and nine months ended September 30, 2021, respectively, and were included in Cost of goods sold in our Consolidated Interim Statements of Operations.

Related to the agreements with Honeywell, our Consolidated Interim Balance Sheets includes liabilities of $ 16 million as of September 30, 2021.

Liability balances are primarily related to lease contracts of $ 13 million as of September 30, 2021.

During the three and nine months ended September 30, 2021, certain of our related parties participated in our Plan as follows, as more fully discussed in Note 2, Plan of Reorganization and Note 18, Equity :

• The company paid $ 74 million in connection with the following:

◦ We reimbursed Centerbridge Partners, L.P.

(together with its affiliated funds, “Centerbridge”) and Oaktree Capital Management, L.P.

(together with its affiliated funds, “Oaktree”), who are significant shareholders, and Honeywell for professional fees and expenses related to their support of our emergence from Chapter 11 bankruptcy;

• We reimbursed Centerbridge and Oaktree for their participation in the Equity Backstop;

Centerbridge and Oaktree were parties to our Registration Rights Agreement for the registration of our Series A Preferred Stock and to our Series A Investor Rights Agreement.

• Centerbridge and Oaktree were parties to our Registration Rights Agreement (see definition in Note 18, Equity ) for the registration of our Series A Preferred Stock and our Series A Investor Rights Agreement.

Series A Preferred Stock

2 unchanged sentences

It is not a participating security with the Company’s Common Stock.

See Note 2, Reorganization and Chapter 11 Proceedings and Note 18, Equity, of the Consolidated Interim Financial Statements for further details.

See Note 2, Plan of Reorganization and Note 18, Equity , of the Consolidated Interim Financial Statements for further details.

Series B Preferred Stock

Our Series B Preferred Stock is a mandatorily redeemable financial instrument and is classified as debt in our Consolidated Interim Balance Sheets.

The Series B Preferred stock does not require physical settlement by repurchase of a fixed number of the issuer’s equity shares in exchange for cash, and therefore not required to be subsequently remeasured.

The Series B Preferred stock does not require physical settlement by the repurchase of a fixed number of the issuer’s equity shares in exchange for cash, and therefore not required to be subsequently remeasured.

The Series B Preferred Stock redemption options are not required to be bifurcated and are not considered derivatives.

See Note 2, Reorganization and Chapter 11 Proceedings and Note 16, Mandatorily Redeemable Series B Preferred Stock, of the Consolidated Interim Financial Statements for further details.

On September 30, 2021, the Company filed an amended and restated Certificate of Designations (the “A&R Certificate of Designations”) amending and restating the terms of the Series B Preferred Stock.

The A&R Certificate of Designations became effective on October 1, 2021.

See Note 2, Plan of Reorganization and Note 16, Mandatorily Redeemable Series B Preferred Stock , of the Consolidated Interim Financial Statements for further details.

The amendment was accounted for as a debt modification that did not result in an extinguishment or have a material impact on our Consolidated Interim Financial Statements.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to current year classifications, specifically certain items that had been previously recorded in selling, general and administrative expenses presented now within cost of goods sold.

of goods sold in our Consolidated Interim Statements of Operations.

The reclassifications had no impact on net income, equity, or cash flows as previously reported.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting, provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform.

The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

In January 2021, the FASB issued clarification on the scope of relief related to the reference rate reform.

The Company is currently evaluating the impact of the guidance related to certain existing debt agreements on our Consolidated Financial Statements.

There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s Consolidated Interim Financial Statements and related disclosures.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which clarified the scope and applicability of certain provisions.

The Company has evaluated the impact of ASU 2020-04 and ASU 2021-01 on our debt agreements and hedging contracts and determined that they do not have a material impact on our Consolidated Interim Financial Statements.

There are no other recently issued, but not yet adopted, accounting pronouncements that are expected to have a material impact on the Company’s Consolidated Interim Financial Statements and related disclosures.

Revenue Recognition and Contracts with Customers

1 unchanged sentence

Net sales by region (determined based on country of shipment) and channel are as follows:

Three months ended June 30, 2021

Three months ended September 30, 2021

OEM Aftermarket Other Total

(Dollars in millions)

United States $ 92 $ 49 $ 2 $ 143

Europe 348 40 5 393

Asia 271 12 6 289

Other International 8 6 — 14

Six months ended June 30, 2021

$ 719 $ 107 $ 13 $ 839

Nine months ended September 30, 2021

OEM Aftermarket Other Total

(Dollars in millions)

United States $ 290 $ 129 $ 4 $ 423

Europe 1,263 117 21 1,401

Asia 853 36 20 909

Other International 20 18 — 38

Three months ended June 30, 2020

$ 2,426 $ 300 $ 45 $ 2,771

Three months ended September 30, 2020

OEM Aftermarket Other Total

(Dollars in millions)

United States $ 83 $ 38 $ 2 $ 123

Europe 370 34 8 412

Asia 245 10 6 261

Other International 3 5 — 8

Six months ended June 30, 2020

$ 701 $ 87 $ 16 $ 804

Nine months ended September 30, 2020

OEM Aftermarket Other Total

(Dollars in millions)

United States $ 208 $ 110 $ 3 $ 321

Europe 924 86 23 1,033

Asia 606 29 17 652

Other International 6 14 — 20

$ 1,744 $ 239 $ 43 $ 2,026

Contract Balances

The following table summarizes our contract assets and liabilities balances:

(Dollars in millions)

(Dollars in millions) (Dollars in millions)

Contract assets—January 1 $ 61 $ 6

Contract assets—June 30

Contract assets—September 30

Change in contract assets—Increase/(Decrease) $ ( 5 ) $ 42

Contract liabilities—January 1 $ ( 2 ) $ ( 3 )

Contract liabilities—June 30

Contract liabilities—September 30

Change in contract liabilities—(Increase)/Decrease $ ( 2 ) $ 2

4 unchanged sentences

Such costs are included in Cost of goods sold as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

1 unchanged sentence

Engineering-related expenses 5 3 16 15

$ 38 $ 31 $ 115 $ 99

Other Expense, Net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

2 unchanged sentences

Factoring and notes receivables discount fees — — 1 1

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

$ — $ 14 $ 1 $ 45

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions)

Tax expense $ 28 $ ( 1 ) $ 82 $ 11

Effective tax rate 30.8 % ( 10 ) % 18.3 % 16.9 %

The decrease in the effective tax rate for the three months and six months ended June 30, 2021 compared to the prior year periods primarily related to the nontaxable gain on the settlement of the Honeywell claims recorded in the current period and higher overall earnings from improved economic conditions during the COVID-19 crisis.

The effective tax rate for the three months and six months ended June 30, 2021 was lower than the U.S.

federal statutory rate of 21 % primarily because of the nontaxable gain on the settlement of the Honeywell claims.

For the period ended June 30, 2020 the Company computed its effective tax rate using actual year to date information rather than a full year forecast to compute an annual effective tax rate.

Based on available forecasts which take into account a range of potential impacts from COVID-19, the Company’s effective tax rate was expected to be highly sensitive to changes in pre-tax book income because of non-deductible asbestos related expenses which have no correlation to earnings.

Accordingly, the Company concluded that computing its effective tax rate using year to date actual results is its best estimate of tax expense for the period ended June 30, 2020 .

The increase in the effective tax rate for the three months ended September 30, 2021 compared to the prior-year period primarily related to decreased tax benefits on withholding taxes related to undistributed earnings, partially offset by fewer nondeductible expenses.

The increase in the effective tax rate for the nine months ended September 30, 2021 compared to the prior-year period primarily related to decreased tax benefits on withholding taxes related to undistributed earnings, partially offset by the tax benefits from the nontaxable gain on the settlement of the Honeywell claims in excess of nondeductible expenses.

The effective tax rate for the three months ended September 30, 2021 was higher than the U.S.

federal statutory rate of 21 % primarily because of withholding taxes, nondeductible expenses and tax reserves, partially offset by lower taxes on non-U.S.

The effective tax rate for the nine months ended September 30, 2021 was lower than the U.S.

federal statutory rate of 21 % primarily due to the nontaxable gain on the settlement of the Honeywell claims in excess of non-deductible expenses.

The effective tax rate can vary from quarter to quarter due to changes in the Company’s global mix of earnings, impacts of COVID-19 , the resolution of income tax audits, changes in tax laws (including U.S.

3 unchanged sentences

Accounts, Notes and Other Receivables—Net

September 30,

2021 December 31,

(Dollars in millions)

2 unchanged sentences

Other receivables 71 77

Less—Allowance for doubtful accounts

Trade Receivables include $ 56 million and $ 61 million of unbilled customer contract asset balances as of June 30, 2021 and December 31, 2020, respectively.

Less—Allowance for expected credit losses ( 8 ) ( 13 )

Trade Receivables include $ 56 million and $ 61 million of unbilled customer contract asset balances as of September 30, 2021 and December 31, 2020, respectively.

These amounts are billed in accordance with the terms of customer contracts to which they relate.

2 unchanged sentences

The Company has entered into arrangements with financial institutions to sell eligible trade receivables.

During the periods ended June 30, 2021 and December 31, 2020, the Company sold $ 153 million and $ 473 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

The Company also received guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region.

During the three and nine months ended September 30, 2021, the Company sold $ 104 million and $ 437 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

Expense of $ 1 million was recognized within Other expense, net for the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, the Company sold $ 128 million and $ 296 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

Expense of less than $ 1 million was recognized within Other expense, net for the nine months ended September 30, 2020.

The Company also received guaranteed banknotes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region.

The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-party financial institutions in exchange for cash.

During the periods ended June 30, 2021 and December 31, 2020, the Company sold $ 0 and $ 160 million of bank notes, respectively, without recourse, and accounted for these as true sales.

As of June 30, 2021 and December 31, 2020, the Company has pledged as collateral $ 27 million and $ 18 million of guaranteed bank notes which have not been sold in order to be able to issue bank notes as payment to certain suppliers.

During the three and nine months ended September 30, 2021, the Company sold $ 0 and $ 0 of banknotes, respectively, without recourse, and accounted for these as true sales.

During the three and nine months ended September 30, 2020, the Company sold $ 51 million and $ 124 million of banknotes, respectively, without recourse, and accounted for these as true sales.

Expense of less than $ 1 million was recognized within Other expense, net for the nine months ended September 30, 2020.

As of September 30, 2021 and December 31, 2020, the Company has pledged as collateral $ 36 million and $ 18 million of guaranteed banknotes which have not been sold in order to be able to issue banknotes as payment to certain suppliers.

Such pledged amounts are included as Notes receivables in our Consolidated Interim Balance Sheet.

Inventories—Net

September 30,

2021 December 31,

(Dollars in millions)

3 unchanged sentences

Less—Reserves ( 34 ) ( 41 )

September 30,

2021 December 31,

(Dollars in millions)

2 unchanged sentences

Accrued Liabilities

September 30,

2021 December 31,

(Dollars in millions)

4 unchanged sentences

Advanced discounts from suppliers, current 15 5

Customer advances and deferred income (a)

Customer advances and deferred income (1)

Accrued interest 8 —

1 unchanged sentence

Other (primarily operating expenses) 37 28

(a) Customer advances and deferred income include $ 2 million and $ 2 million of contract liabilities as of June 30, 2021 and December 31, 2020, respectively.

(1) Customer advances and deferred income include $ 4 million and $ 2 million of contract liabilities as of September 30, 2021 and December 31, 2020, respectively.

See Note 4, Revenue Recognition and Contracts with Customers .

1 unchanged sentence

Expenses related to the repositioning accruals are included in Cost of goods sold in our Consolidated Interim Statements of Operations.

Severance Costs

Severance Costs Exit Costs

(Dollars in millions)

Balance at December 31, 2020

Balance at June 30, 2020

Severance Costs

Charges 14 — 14

Usage—cash ( 7 ) — ( 7 )

Balance at September 30, 2021

$ 14 $ — $ 14

Severance Costs Exit Costs

(Dollars in millions)

Balance at December 31, 2019

Balance at June 30, 2021

Charges 8 — 8

Usage—cash ( 6 ) — ( 6 )

Amounts reclassified to Liabilities subject to compromise ( 4 ) — ( 4 )

Balance at September 30, 2020

Other Liabilities

September 30,

2021 December 31,

(Dollars in millions)

Income taxes $ 99 $ 45

Designated and undesignated derivatives — 22

5 unchanged sentences

The components of lease expense are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

1 unchanged sentence

Supplemental cash flow information related to operating leases is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash outflows from operating

Right-of-use assets obtained in exchange for

lease obligations:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases

$ 3 $ 4 $ 9 $ 9

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ 18 $ 1 $ 23 $ 6

Supplemental balance sheet information related to operating leases is as follows:

September 30,

2021 December 31,

(Dollars in millions)

Other assets $ 50 $ 36

Accrued liabilities 9 5

1 unchanged sentence

Liabilities subject to compromise — 19

June 30, 2021

December 31, 2020

September 30, 2021 December 31, 2020

Weighted-average lease term (in years) 8.87 5.14

2 unchanged sentences

(Dollars in millions)

Thereafter 28

Total lease payments 65

4 unchanged sentences

(the “Lux Borrower”), Garrett Motion Holdings Inc.

Co-Borrower”) and Garrett Motion Sàrl (the “Swiss Borrower”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), which provides for senior secured financing.

Co-Borrower”) and Garrett Motion Sàrl (the “Swiss Borrower,” together with the Lux Borrower and the U.S.

Co-Borrower, the “Borrowers”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), which provides for senior secured financing.

The Credit Facilities consist of:

1 unchanged sentence

a seven-year secured first-lien U.S.

Dollar term loan facility in the amount of $ 715 million;

Dollar term loan facility for $ 715 million;

• Euro Facility :

a seven-year secured first-lien Euro Dollar term loan facility in the amount of € 450 million;

a seven-year secured first-lien Euro term loan facility for € 450 million;

• Revolving Facility :

a five-year senior secured first-lien Revolving Facility in the amount of $ 300 million providing for multi-currency revolving loans.

On the Effective Date, Credit Facilities, net of deferred financing costs were $ 1,221 million , after proceeds from the Credit Facilities and issuance of Series A Preferred Stock (see Note 18) were used to pay off the Company’s pre-emergence indebtedness.

a five-year senior secured first-lien Revolving Facility for $ 300 million providing for multi-currency revolving loans.

On the Effective Date, Credit Facilities, net of deferred financing costs were $ 1,221 million , after proceeds from the Credit Facilities and issuance of Series A Preferred Stock (see Note 18, Equity ) were used to pay off the Company’s pre-emergence indebtedness.

For more information, see Note 2, Plan of Reorganization .

The principal outstanding and carrying amount of our long-term debt as of June 30, 2021 are as follows:

Interest Rate

The principal outstanding and carrying amount of our long-term debt as of September 30, 2021 are as follows:

Due Interest Rate September 30,

Dollar Facility 4/30/2028 3.75 % $ 715

7 unchanged sentences

The interest rate on the Revolving Facility is 2.75 % per annum.

On June 30, 2021, the Company had no borrowings outstanding under the Revolving Facility and had available borrowing capacity of $ 261 million.

This amount consisted of $300 million less undrawn letters of credit of $ 39 million.

Under the Revolving F acility, t he Company may use up to $ 125 million under the Revolving F acility for the issuance of letters of credit to Swiss Borrower or any of its subsidiaries.

In addition, the Company obtained a $ 35 million letter of credit facility for a term of five years .

Future Repayments

Minimum scheduled principal repayments of the Credit Facilities as of June 30, 2021 are as follows:

On September 30, 2021, the Company had no borrowings outstanding under the Revolving Facility, $ 4 million of outstanding letters of credit, and available borrowing capacity of $ 296 million.

Under the Revolving Facility, the Company may use up to $ 125 million under the Revolving Facility for the issuance of letters of credit to the Swiss Borrower or any of its subsidiaries.

Separate from the Revolving Facility, the Company has obtained a $ 35 million bilateral letter of credit facility for a term of five years .

Minimum scheduled principal repayments of the Credit Facilities as of September 30, 2021 are as follows:

September 30,

(Dollars in millions)

Thereafter 1,207

Total debt payments $ 1,237

All obligations under the Credit Facilities are or will be unconditionally guaranteed jointly and severally, by:

All obligations under the Credit Facilities are unconditionally guaranteed jointly and severally, by:

(a) the Company;

(b) each direct and indirect material wholly owned subsidiary of the Company that is organized under the laws of any state of the United States and (c) substantially all of the direct and indirect material wholly owned subsidiaries of the Company that are organized under the laws of certain other jurisdictions, including Australia, England and Wales, Ireland, Italy, Japan, Luxembourg (including Lux Borrower), Mexico, Romania, Slovakia, Switzerland (including Swiss Borrower), and any other jurisdiction at the Swiss Borrower’s option from time to time agreed with the administrative agent, subject in each case to certain exceptions and limitations and agreed guaranty and security principles.

The guarantors organized under the laws of England and Wales, Luxembourg, Switzerland and the United States entered into a guarantee under the Credit Agreement concurrently with the effectiveness of the Credit Agreement.

The guarantors organized under the laws of Australia, Ireland, Italy, Japan, Mexico, Romania and Slovakia have acceded or are expected to accede to such guarantee within 120 days following the Effective Date (or such longer period as agreed between the Company and the administrative agent under the Credit Agreement).

The Credit Facilities are or will be secured on a first priority basis by:

(x) a perfected security interest in the equity interests of each direct material subsidiary of each guarantor under the Credit Facilities and (y) perfected security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of each of the guarantors under the Credit Facilities, subject, in each case, to certain exceptions and limitations, including the agreed guaranty and security principles.

The guarantors organized under the laws of England and Wales, Luxembourg, Switzerland and the United States entered into security documents securing the obligations of each borrower concurrently with effectiveness of the Credit Agreement.

The guarantors organized under the laws of Australia, Ireland, Japan, Mexico, Romania and Slovakia have executed, or are expected to execute security documents within 120 days following the Effective Date (or such longer period as agreed between the Company and the administrative agent under the Credit Agreement).

The Revolving Facility matures five years after the Effective Date of the Credit Agreement, with certain extension rights in the discretion of each lender.

(b) each existing and future direct and indirect material wholly-owned subsidiary of the Company that is organized under the laws of any state of the United States and (c) substantially all of the existing and future direct and indirect material wholly-owned subsidiaries of the Company that are organized under the laws of certain other jurisdictions, including Australia, England and Wales, Ireland, Italy, Japan, Luxembourg (including Lux Borrower), Mexico, Romania, Slovakia, Switzerland (including Swiss Borrower), and any other jurisdiction at the Swiss Borrower’s option from time to time agreed with the administrative agent, subject in each case to certain exceptions and limitations and agreed guaranty and security principles.

The guarantors organized under the laws of Australia, Ireland, Italy, Japan, Mexico, Romania and Slovakia have subsequently acceded to such guarantee.

The Credit Facilities are secured on a first-priority basis by:

(i) a perfected security interest in the equity interests of each direct material subsidiary of each guarantor under the Credit Facilities and (ii) perfected security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of each of the guarantors under the Credit Facilities, subject, in each case, to certain exceptions and limitations, including the agreed guaranty and security principles.

The guarantors organized under the laws of Australia, Ireland, Japan, Mexico, Romania and Slovakia have subsequently executed security documents.

The Revolving Facility matures five years after the effective date of the Credit Agreement, with certain extension rights at the discretion of each lender.

The Term Loan Facilities mature seven years after the Effective Date of the Credit Agreement, with certain extension rights in the discretion of each lender.

19 unchanged sentences

In addition, the Revolving Facility also contains a financial covenant requiring the maintenance of a consolidated total leverage ratio of not greater than 4.70 to 1.00 as of the end of each fiscal quarter if, on the last day of any such fiscal quarter , the aggregate amount of loans and letters of credit (excluding backstopped or cash collateralized letters of credit and other letters of credit with an aggregate face amount not exceeding $ 30 million) outstanding under the Revolving Facility exceeds 35 % of the aggregate commitments thereunder.

As of June 30, 2021, the Company is in compliance with all its financing covenants.

As of September 30, 2021, the Company is in compliance with all its financing covenants.

Events of Default

4 unchanged sentences

Co-Borrower, Garrett Motion Sàrl (f/k/a Honeywell Technologies Sàrl), as Swiss Borrower, the Lenders and Issuing Banks party thereto and the Pre-petition Credit Agreement Agent, as Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms;

and (b) that certain Indenture, dated as of September 27, 2018, among GMI, as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, pursuant to which the Senior Subordinated Notes were issued, as may be amended, supplemented or otherwise modified from time to time.

and (b) that certain Indenture, dated as of September 27, 2018, among Garrett Motion Inc., as Parent, Garrett LX I S.à r.l., as Issuer, Garrett Borrowing LLC, as Co-Issuer, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent, pursuant to which the Senior Notes were issued, as may be amended, supplemented or otherwise modified from time to time.

Holders of Allowed Pre-petition Credit Agreement Claims (as defined in the Plan) received payment in cash in an amount equal to such holder’s Allowed Pre-petition Credit Agreement Claim.

3 unchanged sentences

Series B Preferred Stock

Pursuant to the Plan and the Plan Support Agreement, on the Effective Date the Company issued 834,800,000 shares of Series B Preferred Stock to Honeywell in satisfaction of its claims arising from (a) that certain Indemnification Guarantee Agreement, dated September 27, 2018, by and among Honeywell ASASCO 2 Inc., Garrett ASASCO Inc., and the other Guarantors party thereto, as may be amended, restated, supplemented or otherwise modified from time to time prior to the Effective Date (the “Honeywell Indemnification Guarantee Agreement”);

(b) (i) that certain Indemnification and Reimbursement Agreement, dated September 12, 2018 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time), by and among Honeywell ASASCO Inc., Honeywell ASASCO 2 Inc.

and Honeywell International Inc.;

and (ii) that certain Contribution and Assignment Agreement, dated September 14, 2018 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time), by and between Honeywell ASASCO Inc.

and Garrett ASASCO Inc., as each may be amended, restated, supplemented or otherwise modified from time to time prior to the Effective Date (collectively, the “Honeywell Indemnity Agreement”);

(c) that certain Tax Matters Agreement, dated September 12, 2018, by and among Honeywell International Inc., GMI, Honeywell ASASCO Inc.

and Honeywell ASASCO 2 Inc., as may be amended, supplemented or otherwise modified from time to time (the “Tax Matters Agreement” and, together with the Honeywell Indemnification Guarantee Agreement and the Honeywell Indemnity Agreement, the “Honeywell Agreements”).

The Company is authorized to grant 1,200,000,000 shares of preferred stock in the reorganized company.

The Series B Preferred Stock will not be entitled to any dividends or other distributions or payments other than the scheduled redemption payments and payments upon liquidation as provided in the Series B Certificate of Designations.

On April 30 of each year, beginning on April 30, 2022 and ending on April 30, 2030, on which any shares of Series B Preferred Stock are outstanding (each, a “Scheduled Redemption Date”), the Company will redeem, pro rata from each holder, an aggregate number of shares of Series B Preferred Stock equal to a scheduled redemption amount with respect to such Scheduled Redemption Date as set forth in the Series B Certificate of Designations divided by $ 1.00 per share (the “Scheduled Redemption Amounts”), provided that the Company will not be obligated to redeem the shares of Series B Preferred Stock on a Scheduled Redemption Date if, as of such date, (i) the Consolidated EBITDA of the Company and its subsidiaries measured as of the end of the most recently completed fiscal year is less than $ 425 million or (ii) the Company does not have sufficient funds legally available to pay the redemption amount due on such Scheduled Redemption Date.

1 unchanged sentence

Any shares of Series B Preferred Stock that have not been redeemed on a Scheduled Redemption Date outstanding as of April 30, 2030, will be redeemed on April 30, 2030.

Except as required by law, the holders of Series B Preferred Stock will have no voting rights, provided that a vote or the consent of the holders representing a majority of the Series B Preferred Stock will be required to effect or validate (i) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series or any securities

convertible into shares of any class or series of capital stock that would rank senior to the Series B Preferred Stock, (ii) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series of capital stock that would rank pari passu to the Series B Preferred Stock on the occurrence of a liquidation, (iii) entry by the Company or any of its subsidiaries into any agreement containing or imposing, directly or indirectly, any restrictions (including, but not limited to, any covenant or agreement) on the Company’s ability to make required payments on or redeem the shares of Series B Preferred Stock, (iv) any amendment, modification, alteration or repeal of any provision of the Certificate of Incorporation or any other certificate of designations of the Company that would have an adverse effect, in any material respect, on the rights, preferences, privileges or voting power of the shares of Series B Preferred Stock or any holder thereof or any amendment, modification, alteration or repeal of the Series B Certificate of Designations, (iv) any increase in the number of members of the Board at a time when the sum of (x) the aggregate value of deferred Scheduled Redemption Amounts relating to past Scheduled Redemption Dates (plus any unpaid interest accruing thereon) plus (y) the aggregate present value of future Scheduled Redemption Amounts, calculated using a discount rate of 7.25 % (such sum, the “Aggregate Series B Liquidation Preference”) is greater than $ 125 million or (vi) any action or inaction that would reduce the stated amount of any share of Series B Preferred Stock to below $ 1.00 per share.

Except as required by law, the holders of Series B Preferred Stock have no voting rights, provided that a vote or the consent of the holders representing a majority of the Series B Preferred Stock will be required to effect or validate (i) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock that would rank senior to the Series B Preferred Stock, (ii) any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series of capital stock that would rank pari passu to the Series B Preferred Stock on the occurrence of a liquidation, (iii) entry by the Company or any of its subsidiaries into any agreement containing or imposing, directly or indirectly, any restrictions (including, but not limited to, any covenant or agreement) on the Company’s ability to make required payments on or redeem the shares of Series B Preferred Stock, (iv) any amendment, modification, alteration or repeal of any provision of the Certificate of Incorporation or any other certificate of designations of the Company that would have an adverse effect, in any material respect, on the rights, preferences, privileges or voting power of the shares of Series B Preferred Stock or any holder thereof or any amendment, modification, alteration or repeal of the Series B Certificate of Designations, (v) any increase in the number of members of the Board at a time when the sum of (a) the aggregate value of deferred Scheduled Redemption Amounts relating to past Scheduled Redemption Dates (plus any unpaid interest accruing thereon) plus (b) the aggregate present value of future Scheduled Redemption Amounts, calculated using a discount rate of 7.25 % (such sum, the “Aggregate Series B Liquidation Preference”) is greater than $ 125 million or (vi) any action or inaction that would reduce the stated amount of any share of Series B Preferred Stock to below $ 1.00 per share.

The scheduled redemptions are $ 35 million for April 30, 2022 and $ 100 million for April 30 th of each year from April 30, 2023 to April 30, 2030, totaling $ 835 million.

This amount is recorded on our Consolidated Interim Balance Sheet as of June 30, 2021 at the net present value of the redemptions, discounted at 7.25 % , of $ 585 million.

Of the amount recorded on our Consolidated Interim Balance Sheet as of June 30, 2021, $ 550 million is classified as a long-term liability.

If the Company has Consolida ted EBITDA (as defined in the Series B Certificate of Designations) for the twelve months ended June 30, 2021 and for the twelve months ended September 30, 2021 of over $ 600 million, the entire recorded amount will be classified as current on our September 30, 2021 Consolidated Interim Balance Sheet.

This amount is recorded on our Consolidated Interim Balance Sheet as of

September 30, 2021 at the net present value of the redemptions, discounted at 7.25 %, of $ 595 million.

Of the amount recorded on our Consolidated Interim Balance Sheet as of September 30, 2021, $ 347 million is classified as a long-term liability.

Each holder of Series B Preferred Stock will have the right to require the Company to redeem all, but not less than all, of such holder’s shares of Series B Preferred Stock if the Consolidated EBITDA (as defined in the Series B Certificate of Designations) of the Company and its subsidiaries exceeds $ 600 million for two consecutive fiscal quarters.

On September 30, 2021, the Company filed the A&R Certificate of Designations amending and restating the terms of the Series B Preferred Stock.

The A&R Certificate of Designations became effective on October 1, 2021.

The A&R Certificate of Designations amended and restated the original Series B Certificate of Designations to, among other things, (i) require the Company to effect a redemption of outstanding shares of Series B Preferred Stock, on or prior to March 31, 2022, such that the Present Value (as defined in the A&R Certificate of Designations) of all of the remaining outstanding shares of Series B Preferred Stock shall be $ 400 million, subject to applicable law and certain conditions, including that the Company has funds legally available to do so (the “Planned Partial Early Redemption”) and (ii) provide that the right of each holder of the Series B Preferred Stock to require the Company to redeem all of such holder’s shares of Series B Preferred Stock (the “Holder Put Right”) cannot be exercised until after December 31, 2022 at the earliest (subject to the prior occurrence of a triggering event), unless the Planned Partial Early Redemption does not occur on or prior to March 31, 2022, in which case the Holder Put Right can be exercised (subject to the prior occurrence of a triggering event) after March 31, 2022 on the terms set forth in the A&R Certificate of Designations.

Upon liquidation, Series B Preferred Stock will rank (A) senior to the Common Stock and (B) junior to the Series A Preferred Stock, and will have a right to be paid the Aggregate Series B Liquidation Preference.

The Company will be automatically obligated to redeem all shares of Series B Preferred Stock upon (i) a change of control, (ii) an assertion from the Company or the Board that any portion of the Series B Preferred Stock or any of the Company’s obligations under the Series B Certificate of Designations are invalid or unenforceable, (iii) if indebtedness outstanding under the Credit Agreement is accelerated (and such acceleration is not rescinded), or (iv) the Company or any of its material subsidiaries enters bankruptcy or similar proceedings affecting creditors’ or equity holders’ rights.

Under the terms of the Series B Certificate of Designations, the Majority in Interest (as defined in the Series B Certificate of Designations) has the exclusive right, voting separately as a class, to elect or appoint one director to the Board (such director the “Series B Director”) on the Effective Date.

The Majority in Interest has a continuing right, voting separately as a class, to elect or appoint the Series B Director, and an exclusive right to remove Series B director at any time for any reason or no reason (with or without cause), subject to the rights of other holders to remove any Series B Director for cause to the extent provided by the DGCL, until the first date on which the Aggregate Series B Liquidation Preference is not greater than $ 125 million (the “Series B Threshold Date”).

The Majority in Interest (as defined in the A&R Certificate of Designations) has a continuing right, voting separately as a class, to elect or appoint the Series B Director (as defined in the A&R Certificate of Designations), and an exclusive right to remove the Series B Director at any time for any reason or no reason (with or without cause), subject to the rights of other holders to remove any Series B Director for cause to the extent provided by the Delaware General Corporation Law until the first date on which the Aggregate Series B Liquidation Preference is not greater than $ 125 million (the “Series B Threshold Date”).

From and after the Series B Threshold Date, the Majority in Interest will have no right to elect or appoint any directors to the Board.

If the Majority in Interest is no longer entitled to elect or appoint a Series B Director, then the then-serving Series B Director will automatically be deemed to have resigned from the Board.

So long as any shares of Series B Preferred Stock are outstanding, the Company may not take certain actions without the written consent of the Majority in Interest (as defined in the Series B Certificate of Designations), including, among other things, increase the size of the Board of Directors so long as the Aggregate Series B Liquidation Preference is greater than $ 125 million.

So long as any shares of Series B Preferred Stock are outstanding, the Company may not take certain actions without the written consent of the Majority in Interest, including, among other things, increasing the size of the Board so long as the Aggregate Series B Liquidation Preference is greater than $ 125 million.

Financial Instruments and Fair Value Measures

Our credit, market and foreign currency risk management policies are described in Note 18, Financial Instruments and Fair Value Measures, of the notes to the audited annual Consolidated and Combined Financial Statements for the year ended December 31, 2020 included in our 2020 Form 10-K.

At June 30, 2021 and December 31, 2020, we had contracts with aggregate gross notional amounts of $ 2,252 million and $ 19 million, respectively, to hedge interest rates and foreign currencies, principally the U.S.

At September 30, 2021 and December 31, 2020, we had contracts with aggregate gross notional amounts of $ 2,277 million and $ 19 million, respectively, to hedge interest rates and foreign currencies, principally the U.S.

Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar and Korean Won.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2021 and December 31, 2020:

Notional Amounts

Designated forward currency exchange

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:

Notional Amounts Assets Liabilities

September 30,

2021 December 31, 2020

September 30,

2021 December 31, 2020

September 30,

2021 December 31, 2020

Designated instruments:

Designated forward currency exchange contracts $ 314 $ — $ 5 $ — $ 1 $ —

Designated cross-currency swap 715 — 16 — — —

Total designated instruments 1,029 — 21 — 1 —

Undesignated instruments:

Undesignated interest rate swap 963 — — — — —

Undesignated forward currency

exchange contracts

Undesignated forward currency exchange contracts 285 19 1 — 3 —

Total undesignated instruments 1,248 19 1 — 3 —

Total designated and undesignated

Total designated and undesignated instruments $ 2,277 $ 19 $ 22 $ — $ 4 $ —

On June 11, 2021 the Company entered into interest rate swap contracts to partially mitigate market value risk associated with interest rate fluctuations on its variable rate term loan debt.

As of June 30, 2021, the company had outstanding interest rate swaps with an aggregate notional amount of € 830 million, with respective maturities April 2023, April 2024, April 2025, April 2026 and April 2027.

The company utilizes interest rate swaps specifically to mitigate variable interest risk exposure on its long-term debt portfolio and have not designated them as hedging instruments for accounting purposes.

As of September 30, 2021, the Company had outstanding interest rate swaps with an aggregate notional amount of € 830 million, with respective maturities of April 2023, April 2024, April 2025, April 2026 and April 2027.

The Company uses interest rate swaps specifically to mitigate variable interest risk exposure on its long-term debt portfolio and has not designated them as hedging instruments for accounting purposes.

Effective with our entry into the Credit Agreement (see Note 15, Long-term Debt and Credit Agreements ), the Company entered into floating-floating cross-currency swap contracts to limit its exposure to investments in certain foreign subsidiaries exposed to foreign exchange fluctuations.

The cross-currency swaps have been designated as net investment hedges of its Euro-denominated operations.

As of June 30, 2021, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company's investment in Euro-denominated operations.

The cross-currency swaps fair values were net assets of $ 2 million at June 30, 2021.

Our Consolidated Interim Statements of Comprehensive Income (loss) includes Changes in fair value of net investment hedges, net of tax of $ 15 million during the three and six months ended June 30, 2021 related to these net investment hedges.

As of September 30, 2021, an aggregate notional amount of € 606 million was designated as net investment hedges of the Company’s investment in Euro-denominated operations.

The cross-currency swaps’ fair values were net assets of $ 16 million at September 30, 2021.

Our Consolidated Interim Statements of Comprehensive Income (loss) includes Changes in fair value of net investment hedges, net of tax of $ 12 million and $ 27 million during the three and nine months ended September 30, 2021, respectively, related to these net investment hedges.

No ineffectiveness has been recorded on the net investment hedges.

1 unchanged sentence

As such, these derivative instruments are classified within Level 2.

The assumptions used in measuring fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market observable interest rate curves, cross currency basis curves, credit default swap curves, and foreign exchange rates.

The carrying value of Cash, cash equivalents and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Balance Sheets approximates fair value.

The assumptions used in measuring the fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market-observable interest rate curves, cross-currency basis curves, credit default swap curves, and foreign exchange rates.

The carrying value of Cash, cash equivalents and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Interim Balance Sheet approximates fair value.

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:

June 30, 2021

Carrying Value

September 30, 2021

Carrying Value Fair Value

(Dollars in millions)

Terms Loans B (Secured)

Term Loan Facilities (Secured)

$ 1,200 $ 1,237

The Company determined the fair value of certain of its long-term debt and related current maturities utilizing transactions in the listed markets for similar liabilities.

1 unchanged sentence

Issuance of Common Stock

As discussed in Note 2, Plan of Reorganization, upon the effectiveness of and pursuant to the Plan, all Old Common Stock of the Company was cancelled and the Company issued 65,035,801 shares of Common Stock to holders of Old Common Stock that did not exercise the Cash-Out Option.

Each holder of Existing Common Stock that did not exercise the Cash-Out Option received a number of shares of new Common Stock equal to the number of shares of Existing Common Stock held by such holder in consideration for the cancellation of their shares of Common Stock.

As discussed in Note 2, Plan of Reorganization , upon the effectiveness of and pursuant to the Plan, all Old Common Stock of the Company was cancelled and the Company issued 65,035,801 shares of Common Stock to holders of Old Common Stock that did not exercise the Cash-Out Election.

Each holder of Existing Common Stock that did not exercise the Cash-Out Election received a number of shares of new Common Stock equal to the number of shares of Old Common Stock held by such holder in consideration for the cancellation of their shares of Old Common Stock.

The Company paid $ 69 million to holders of Old Common Stock who had made the Cash-Out Election.

Issuance of Series A Preferred Stock

In connection with the Company’s emergence from bankruptcy and pursuant to the Plan, the Company issued 247,768,962 shares of the Company’s Series A Preferred Stock to affiliated funds of Centerbridge Partners, L.P.

(“Centerbridge”), affiliated funds of Oaktree Capital Management, L.P.

(“Oaktree”) and certain other investors and parties, including in connection with the consummation of two rights offerings and the related Replacement Equity Backstop Commitment Agreement (such parties to the Replacement Equity Backstop Commitment Agreement, the “Additional Investors”).

In connection with the Company’s emergence from bankruptcy and pursuant to the Plan, the Company issued 247,757,290 shares of the Company’s Series A Preferred Stock to affiliated funds of Centerbridge, affiliated funds of Oaktree and certain other investors and parties, including in connection with the consummation of two rights offerings and the related Replacement Equity Backstop Commitment Agreement.

The Company is authorized to grant 1,200,000,000 shares of preferred stock in the reorganized company.

Series A Preferred Stock

Holders of the Series A Preferred Stock will be entitled to receive, when, as and if declared by a committee of disinterested directors of the Board (which initially consisted of Daniel Ninivaggi, Julia Steyn, Robert Shanks, and D’aun Norman) out of funds legally available for such dividend, cumulative cash dividends at an annual rate of 11 % on the stated amount per share plus the amount of any accrued and unpaid dividends on such share, accumulating on a daily basis and payable quarterly on January 1, April 1, July 1 and October 1, respectively, in each year.

Holders of the Series A Preferred Stock will be entitled to receive, when, as and if declared by a committee of disinterested directors of the Board (which initially consisted of Daniel Ninivaggi, Julia Steyn, Robert Shanks, and D’aun Norman) out of funds legally available for such dividend, cumulative cash dividends at an annual rate of 11 % on the stated amount per share plus the amount of any accrued and unpaid dividends on such share, accumulating daily and payable quarterly on January 1, April 1, July 1 and October 1, respectively, in each year.

Such a dividend will not be declared at any time when Consolidated EBITDA (as defined in the Series A Certificate of Designations) of the Company and its subsidiaries for the most recent four fiscal quarters for which financial statements of the Company are available is less than $ 425 million.

3 unchanged sentences

Such payments will be made concurrently with the dividend or distribution to the holders of the Common Stock.

The Company is restricted from paying or declaring any dividend, or making any distribution, on any class of Common Stock or any future class of preferred stock established thereafter by the Board (other than any series of capital stock that ranks pari passu to the Series A Preferred Stock) (such stock “Dividend Junior Stock”), other than a dividend payable solely in Dividend Junior Stock, unless (i) all cumulative accrued and unpaid preference dividends on all outstanding shares of Series A Preferred Stock have been paid in full and the full dividend thereon due has been paid or declared and set aside for payment and (ii) all prior redemption requirements with respect to Series A Preferred Stock have been complied with, provided, notwithstanding the foregoing, that the Company may pay a dividend or make a distribution on Dividend Junior Stock if (x) the holders of the Series A Preferred Stock also participate in such dividends or distributions, (y) such dividends or distributions are made on or prior to December 31, 2022, and (z) the full board of directors of the Company has ratified the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

The Company is restricted from paying or declaring any dividend, or making any distribution, on any class of Common Stock or any future class of preferred stock established thereafter by the Board (other than any series of capital stock that ranks pari passu to the Series A Preferred Stock) (such stock, “Dividend Junior Stock”), other than a dividend payable solely in Dividend Junior Stock, unless (i) all cumulative accrued and unpaid preference dividends on all outstanding shares of Series A Preferred Stock have been paid in full and the full dividend thereon due has been paid or declared and set aside for payment and (ii) all prior redemption requirements with respect to Series A Preferred Stock have been complied with, provided, notwithstanding the foregoing, that the Company may pay a dividend or make a distribution on Dividend Junior Stock if (a) the holders of the Series A Preferred Stock also participate in such dividends or distributions, (b) such dividends or distributions are made on or prior to December 31, 2022, and (c) the full Board of the Company has ratified the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

Under the terms of the Credit Agreement, during the fiscal years ending December 31, 2021, and December 31, 2022, the Company may not make payments or redemptions in cash solely with respect to the Series A Preferred Stock unless a ratable payment (on an as-converted basis) is made to holders of the Common Stock and such payments would otherwise be permitted under the terms of the Credit Agreement.

On July 21, 2021, the terms of the Certificate of Designations of the Series A Preferred Stock were amended to allow the payment of a ratable dividend on the Series A Preferred Stock and the Common Stock prior to December 31, 2022 so long as the full board of directors of the Company ratifies the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

On June 17, 2021 the Board determined that the amount of preference dividends which will accumulate for the preference dividend period ended June 30, 2021 is $ 0.09625 per share.

As there were 247,768,962 shares of Series A Preferred Stock as of June 30, 2021, the aggregate accumulated dividend as of and for the three and six months ended June 30, 2021 is approximately $ 24 million and is presented as a reduction to Net income (loss) available to common shareholders in our Consolidated Interim Statements of Operations.

On July 21, 2021, the terms of the Certificate of Designations of the

Series A Preferred Stock were amended to allow the payment of a ratable dividend on the Series A Preferred Stock and the Common Stock prior to December 31, 2022 so long as the full Board of the Company ratifies the Disinterested Directors’ Committee’s declaration of any such dividend or distribution.

The Board determined that the amount of preference dividends which will accumulate for the preference dividend period ended September 30, 2021 is $ 0.147022 per share.

The Board had previously determined that the amount of preference dividends which will accumulate for the preference dividend period ended June 30, 2021 was $ 0.09625 per share.

As there were 247,757,290 shares of Series A Preferred Stock as of September 30, 2021, the aggregate accumulated dividend as of September 30, 2021 is approximately $ 60 million and is presented as a reduction to Net income (loss) available to common shareholders in our Consolidated Interim Statements of Operations.

Holders of the Series A Preferred Stock will be entitled to vote together as a single class with the holders of Common Stock, with each such holder entitled to cast the number of votes equal to the number of votes such holder would have been entitled to cast if such holder were the holder of a number of shares of Common Stock equal to the whole number of shares of Common Stock that would be issuable upon conversion of such holder’s shares of Series A Preferred Stock in addition to a number of shares of Common Stock equal to the amount of cumulative unpaid preference dividends (whether or not authorized or declared) divided by the lesser of (i) the fair market value per share of such additional shares and (ii) the fair market value per share of the Common Stock.

So long as any shares of Series A Preferred Stock are outstanding, a vote or the consent of the holders representing a majority of the Series A Preferred Stock will be required for (i) effecting or validating any amendment, modification or alteration to the Certificate of Incorporation that would authorize or create, or increase the authorized amount of, any shares of any class or series or any securities convertible into shares of any class or series of capital stock that would rank senior or pari passu to the Series A Preferred Stock with respect to dividend payments or upon the occurrence of a liquidation, (ii) any increase in the authorized number of shares of Series A Preferred Stock or of any series of capital stock that ranks pari passu with Series A Preferred Stock, (iii) effecting or validating any amendment, alteration or repeal of any provision of the Certificate of Incorporation or Bylaws that would have an adverse effect on the rights, preferences, privileges or voting power of Series A Preferred Stock or the holders thereof in any material respect, or (iv) any action or inaction that would reduce the stated amount of any share of Series A Preferred Stock to below $ 5.25 per share.

Upon liquidation, Series A Preferred Stock will rank senior to the Common Stock and to the Series B Preferred Stock, and will have the right to be paid, out of the assets of the Company legally available for distribution to its stockholders, an amount equal to the Aggregate Liquidation Entitlement (as defined in the Series A Certificate of Designations) for all outstanding shares of Series A Preferred Stock.

Upon liquidation, Series A Preferred Stock will rank senior to the Common Stock and the Series B Preferred Stock, and will have the right to be paid, out of the assets of the Company legally available for distribution to its stockholders, an amount equal to the Aggregate Liquidation Entitlement (as defined in the Series A Certificate of Designations) for all outstanding shares of Series A Preferred Stock.

All shares of Series A Preferred Stock will automatically convert to shares of Common Stock, at an initial conversion price of $ 5.25 per share of Common Stock (subject to adjustment as described in the Series A Certificate of Designations) (the “Conversion Price”) upon either (i) the election of holders representing a majority of the then-outstanding Series A Preferred Stock or (ii) the occurrence of a Trading Day (as defined in the Series A Certificate of Designations) at any time on or after the date which is two years after the Effective Date on which (A) the aggregate stated amount of all outstanding shares of Series B Preferred Stock is an amount less than or equal to $ 125 million, (B) the Common Stock is traded on a Principal Exchange, a Fallback Exchange or an Over-the-Counter Market (each as defined in the Series A Certificate of Designations) and, in each case, the Automatic Conversion Fair Market Value (as defined in the Series A Certificate of Designations) of the Common Stock exceeds 150 % of the Conversion Price, and (C) the Consolidated EBITDA (as defined in the Series A Certificate of Designations) of the Company and its subsidiaries for the last twelve months ended as of the last day of each of the two most recent fiscal quarters is greater than or equal to $ 600 million.

Shares of Series A Preferred Stock are also convertible into Common Stock at any time at the option of the holder, effective on January 1, April 1, July 1 and October 1 in each year, or on the third business day prior to the date of redemption of the outstanding shares of the Series A Preferred Stock as described in the following paragraph.

The Company may, at its election, redeem all but not less than all of the outstanding shares of Series A Preferred Stock (i) at any time following the date which is six years after the Effective Date or (ii) in connection with the consummation of a Change of Control (as defined in the Series A Certificate of Designations), in either case for a cash purchase price equal to $ 5.25 per share plus cumulative unpaid preference dividends (whether or not authorized or declared) as of the redemption date.

purchase price equal to $ 5.25 per share plus cumulative unpaid preference dividends (whether or not authorized or declared) as of the redemption date.

Registration Rights Agreement

1 unchanged sentence

Pursuant to the terms of the Registration Rights Agreement, we filed a registration statement on Form S-1 (Registration No.

333-256659), registering (i) 243,265,707 shares of our Series A Preferred Stock, (ii) 52,471,709 shares of our Common Stock and (iii) 243,265,707 shares of our Common Stock issuable upon conversion of our Series A Preferred Stock (the “Resale Registration Statement), in each case initially issued to the Registration Rights Holders in connection with our emergence from bankruptcy on April 30, 2021.

333-256659) registering (i) 243,265,707 shares of our Series A Preferred Stock, (ii) 52,471,709 shares of our Common Stock and (iii) 243,265,707 shares of our Common Stock issuable upon conversion of our Series A Preferred Stock (the “Resale Registration Statement"), in each case initially issued to certain holders of the Common Stock and Series A Preferred Stock (the “Registration Rights Holders”) in connection with our emergence from bankruptcy on April 30, 2021.

The Resale Registration Statement was declared effective by the SEC on June 11, 2021, which may result in the resale of a substantial number of shares of our Common Stock or Series A Preferred Stock by the relevant Registration Rights Holders.

11 unchanged sentences

The Registration Rights Agreement includes customary indemnification provisions.

The Company will be responsible for its own expenses associated with the performance of its obligations under the Registration Rights

Agreement and certain fees and expenses of legal counsel to the relevant Registration Rights Holders.

The Company will be responsible for its own expenses associated with the performance of its obligations under the Registration Rights Agreement and certain fees and expenses of legal counsel to the relevant Registration Rights Holders.

Except as described in the preceding sentence, the Registration Rights Holders will bear their own expenses, including any underwriting discounts, selling commissions and transfer taxes applicable to any sale of Registrable Securities.

7 unchanged sentences

(“Oaktree Opportunities” and, together with OCM Opps, Oaktree Value and Oaktree Phoenix, the “Oaktree Investors”) and the other signatories thereto (the “Additional Investors” and, together with the Centerbridge Investors and the Oaktree Investors, the “Series A Investors”).

the Series A Investor Rights Agreement, as of the Effective Date, the Centerbridge Investors and Oaktree Investors each have the right to designate three directors for election to the Board and the Additional Investors have the right to designate one director for election to the Board.

Pursuant to the Series A Investor Rights Agreement, as of the Effective Date, the Centerbridge Investors and Oaktree Investors each have the right to designate three members for election to our Board and the Additional Investors have the right to designate one director for election to the Board.

One director will be the chief executive officer of the Company.

The Centerbridge Investors and Oaktree Investors each have a continuing right to designate three directors to the Board, subject to their respective (and permitted transferees’) beneficial ownership of at least 60% of their respective aggregate initial ownership interest as of the Effective Date (the “Initial Investor Interest”), at least one of which will not be employed by Centerbridge Investors or Oaktree Investors, as applicable, or their respective affiliates.

The Centerbridge Investors and Oaktree Investors each have a continuing right to designate three directors to the Board, subject to their respective (and permitted transferees’) beneficial ownership of at least 60 % of their respective aggregate initial ownership interest as of the Effective Date as calculated for each party in accordance with the relevant terms of the Series A Investor Rights Agreement (the “Initial Investor Interest”), at least one of which will not be employed by Centerbridge Investors or Oaktree Investors, as applicable, or their respective affiliates.

If the Centerbridge Investors or Oaktree Investors, as applicable, beneficially own less than 60 % but at least 40 % of their respective Initial Investor Interest, then they will each have the right to designate at least two directors to the Board.

10 unchanged sentences

Fair Value of

Changes in Fair Value of

Net Investment Hedges Pension

Total Accumulated

3 unchanged sentences

Balance at December 31, 2020

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from accumulated other

comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance at June 30, 2020

$ ( 81 ) $ ( 3 ) $ — $ ( 45 ) $ ( 129 )

Other comprehensive income before reclassifications

Amounts reclassified from accumulated other comprehensive income

Net current-period other comprehensive income 37 7 27 — 71

Balance at September 30, 2021

$ ( 44 ) $ 4 $ 27 $ ( 45 ) $ ( 58 )

Fair Value of

Changes in Fair Value of Net Investment Hedges

Total Accumulated

3 unchanged sentences

Balance at December 31, 2019

Other comprehensive income (loss) before

reclassifications

Amounts reclassified from accumulated other

comprehensive income (loss)

Net current period other comprehensive income (loss)

Balance at June 30, 2021

$ 153 $ 4 $ ( 27 ) $ 130

Other comprehensive loss before reclassifications

( 111 ) ( 8 ) — ( 119 )

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive loss ( 111 ) ( 8 ) — ( 119 )

Balance at September 30, 2020

$ 42 $ ( 4 ) $ ( 27 ) $ 11

Stock-Based Compensation

5 unchanged sentences

Up to 5,000,000 shares may be granted as incentive stock options under the Stock Incentive Plan.

As part of emergence from Chapter 11 (Note 2, Plan of Reorganization), the Plan provided for the acceleration of all outstanding awards under the Stock Incentive Plan.

As part of our emergence from Chapter 11 (Note 2, Plan of Reorganization ), the Plan provided for the acceleration of all outstanding awards under the Stock Incentive Plan.

As of the Effective Date, all outstanding awards pursuant to the Stock Incentive Plan were cancelled.

3 unchanged sentences

• Common Stock provided upon the exercise of stock options were deemed outstanding as of the Effective Date.

Award holders are deemed to have exercised the Cash Out Option defined in the Plan, and therefore entitled to a cash payment of $ 6.25 per share;

• Award holders are deemed to have exercised the Cash-Out Election, and therefore entitled to a cash payment of $ 6.25 per share;

• Awards that were “Out of the money” were deemed cancelled for no consideration;

5 unchanged sentences

Measurement of the cash settlement value of RSU awards was performed on an individual grant basis.

As of the Effective Date, all unamortized stock compensation expense of $ 7 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

As of the Effective Date, all unamortized stock compensation expense of $ 7 million was charged to Reorganization items, net in the Consolidated Interim Statement of Operations.

Performance stock units

As of the Effective Date, 228,765 performance stock units (“PSU”) awards were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 1 million which was recorded to Reorganization items, net in the Consolidated Statement of Operations.

As of the Effective Date, 228,765 performance stock units (“PSU”) awards were settled for consideration of $ 6.25 per share, for a total cash settlement of $ 1 million, which was recorded to Reorganization items, net in the Consolidated Interim Statement of Operations.

Stock options

As of the Effective Date, all unvested stock options were considered “Out of the money” and cancelled for no consideration.

all unamortized stock compensation expense of $ 1 million was charged to Reorganization items, net in the Consolidated Statement of Operations.

All unamortized stock compensation expense of $ 1 million was charged to Reorganization items, net in the Consolidated Interim Statement of Operations.

Cash performance stock units

As of the Effective Date, 2,069,897 CPSU awards were settled for consideration $ 1.00 per unit, for a total cash settlement of $ 2 million which was charged to Reorganization items, net in the Consolidated Statement of Operations.

As of the Effective Date, 2,069,897 CPSU awards were settled for consideration of $ 1.00 per unit, for a total cash settlement of $ 2 million, which was charged to Reorganization items, net in the Consolidated Interim Statement of Operations.

2021 Long-Term Incentive Plan

3 unchanged sentences

The maximum aggregate number of shares of our Common Stock that may be issued under the Long-Term Incentive Plan is 31,280,476 shares.

As of June 30, 2021, 2,992,199 shares of our Common Stock were awarded and 28,288,277 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan.

Restricted Stock Units — Restricted stock unit (“RSU”) awards are issued to certain key employees and directors at fair market value at the date of grant.

RSUs typically vest over a period of three or five years , and when vested, each unit entitles the holder to one share of our Common Stock.

As of June 30, 2021, an aggregate of 1,519,324 RSU awards were granted to officers, certain key employees, and non-employee directors under the Long-Term Incentive Plan.

The following table summarizes information about RSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for the six months ended June 30, 2021:

As of September 30, 2021, an aggregate of 3,258,057 shares of our Common Stock were awarded and 28,022,419 shares of our Common Stock were available for future issuance under the Long-Term Incentive Plan.

Restricted Stock Units — RSU awards are issued to certain key employees and directors at fair market value at the date of grant.

RSUs typically vest over three years or five years and when vested, each unit entitles the holder to one share of our Common Stock.

As of September 30, 2021, an aggregate of 1,785,182 RSU awards were granted to officers, certain key employees, and non-employee directors under the Long-Term Incentive Plan.

The following table summarizes information about RSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for the nine months ended September 30, 2021:

Average Grant

1 unchanged sentence

Non-vested at December 31, 2020

1,538,969 $ 13.11

Granted 1,785,182 8.34

Vested ( 326,058 ) 13.10

Forfeited ( 7,261 ) 15.61

Vested and cancelled ( 1,205,650 ) 13.10

Non-vested at June 30, 2021

The following table summarizes the impact to the Consolidated Statement of Operations from RSUs:

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Non-vested at September 30, 2021

1,785,182 $ 8.34

The following table summarizes the impact to the Consolidated Interim Statement of Operations from RSUs:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021 2020 2021 2020

Compensation expense $ 1 $ 2 $ 3 $ 8

1 unchanged sentence

Future income tax benefit recognized — — 1 2

As of June 30, 2021, there was $ 13 million of total unrecognized compensation cost related to unvested RSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted-average period of 4.26 years.

There was no unrecognized compensation expense outstanding related the Stock Incentive Plan.

Awards granted under the Stock Incentive plan were cancelled pursuant to the Plan as part of emergence from Chapter 11 noted above.

Performance Stock Units — As of June 30, an aggregate of 1,472,875 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which upon vesting, entitles the holder to shares of our Common Stock.

As of September 30, 2021, there was $ 14 million of total unrecognized compensation cost related to unvested RSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted-average period of 3.89 years.

There was no unrecognized compensation expense outstanding related to the Stock Incentive Plan.

Awards granted under the Stock Incentive Plan were cancelled pursuant to the Plan as part of our emergence from Chapter 11 noted above.

Performance Stock Units — As of September 30, 2021 an aggregate of 1,472,875 PSU awards were granted to officers and certain key employees under the Long-Term Incentive Plan, which, upon vesting, entitles the holder to shares of our Common Stock.

The actual number of shares an employee receives for each PSU depends on the Company’s performance against various measures.

For the 2021 plan, the performance measures are related to absolute total shareholder return (“TSR”) with stock price hurdles, adjusted EBITDA and adjusted EBITDA margin, weighted 60 %, 20 %, and 20 %, respectively over a two year performance period from January 1, 2022 through December 31, 2023 for the TSR measure and a three year performance period from January 1, 2021 through December 31, 2023 for the adjusted EBITDA and adjusted EBITDA margin measures.

For PSUs granted in 2021,under the Long-Term Incentive Plan, the performance measures are related to absolute total shareholder return (“TSR”) with stock price hurdles, adjusted EBITDA and adjusted EBITDA margin, weighted 60 %, 20 % and 20 % respectively over a two-year performance period from January 1, 2022 through December 31, 2023 for the TSR measure and a three-year performance period from January 1, 2021 through December 31, 2023 for the

adjusted EBITDA and adjusted EBITDA margin measures.

Each grantee is granted a target level of PSUs and may earn between 0 % and 100 % of the target level depending on the Company’s performance against the financial measures.

1 unchanged sentence

A Monte-Carlo simulation model was used to determine the grant date fair value by simulating a range of possible future stock prices for the Company and each member of a selected peer group over the performance period.

The following table summarizes information about PSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for the six months ended June 30, 2021:

The following table summarizes information about PSU activity related to both the Stock Incentive Plan and the Long-Term Incentive Plan for the nine months ended September 30, 2021:

Average Grant

1 unchanged sentence

Non-vested at December 31, 2020

314,111 $ 16.17

Granted 1,472,875 8.67

Forfeited ( 85,346 ) 14.00

Vested and cancelled ( 228,765 ) —

Non-vested at June 30, 2021

Non-vested at September 30, 2021

1,472,875 $ 8.67

The fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date.

The number of underlying shares to be issued will be based on actual performance achievement over the performance period.

The per unit weighted average fair value at the date of grant for PSUs granted during the period ended June 30, 2021 was $ 8.67 .

The per-unit weighted average fair value at the date of grant for PSUs granted during the period ended September 30, 2021 was $ 8.67 .

The fair value of each PSU grant is amortized monthly into compensation expense on a graded vesting (accelerated) basis over a vesting period of 36 months.

The accrual of compensation costs is based on our estimate of the final expected value of the award and is adjusted as required for the performance-based condition.

The Company estimates forfeitures at time of issuance, which results in a reduction in compensation expense.

The Company estimates forfeitures at the time of issuance, which results in a reduction in compensation expense.

As the payout of PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs.

The Company currently does not pay dividends.

The following table summarizes the impact to the Consolidated Statement of Operations from PSUs:

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

The following table summarizes the impact to the Consolidated Interim Statement of Operations from PSUs:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021 2020 2021 2020

Compensation expense $ 1 $ — $ 1 $ —

Reorganization items, net (Note 2)

As of June 30, 2021, there was $ 13 million of total unrecognized compensation cost related to unvested PSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted-average period of 2.42 years.

There was no unrecognized compensation expense outstanding related the Stock Incentive Plan.

Awards granted under the Stock Incentive plan were cancelled pursuant to the Plan as part of emergence from Chapter 11 noted above.

Continuity Awards — In June 2020, in response to the unprecedented and ongoing market uncertainty resulting from the COVID-19 pandemic and in connection with the Board’s evaluation of strategic alternatives for the Company, the Compensation Committee approved one-time cash continuity awards (“Continuity Awards”) to ensure retention of key individuals in exchange for the forfeiture of RSUs and PSUs granted in February 2020.

The Continuity Awards total $ 11 million, with $ 9 million paid in June 2020 and the remaining $ 2 million paid in 2021.

The Continuity Awards were subject to repayment if prior to June 2021, the recipient has a qualifying termination of employment.

Given the Continuity Awards had a 1 -year service requirement, the combined transaction was accounted for as a modification to liability-classified awards.

As of September 30, 2021, there was $ 12 million of total unrecognized compensation cost related to unvested PSUs granted under our Long-Term Incentive Plan, which is expected to be recognized over a weighted average period of 2.22 years.

There was no unrecognized compensation expense outstanding related to the Stock Incentive Plan.

Awards granted under the Stock Incentive Plan were cancelled pursuant to the Plan as part of our emergence from Chapter 11 noted above.

Continuity Awards — In September 2020, in response to the unprecedented and ongoing market uncertainty resulting from the COVID-19 pandemic and in connection with the Board’s evaluation of strategic alternatives for the Company, the Compensation Committee approved one-time cash continuity awards (“Continuity Awards”) to ensure retention of key individuals in exchange for the forfeiture of RSUs and PSUs granted in February 2020.

The Continuity Awards total $ 11 million, with $ 9 million paid in September 2020 and the remaining $ 2 million paid in 2021.

The Continuity Awards were subject to repayment if, prior to June 30, 2021, the recipient had a qualifying termination of employment.

Given the Continuity Awards had a one-year service requirement, the combined transaction was accounted for as a modification to liability-classified awards.

The total incremental compensation cost resulting from the modification was $ 5 million.

As of June 30, 2021, there was no unrecognized compensation cost related to the Continuity Awards.

The following table summarizes information about Continuity Award activity for the period ended June 30, 2021:

As of September 30, 2021, there was no unrecognized compensation cost related to the Continuity Awards.

The following table summarizes information about Continuity Award activity for the period ended September 30, 2021:

Average Grant

1 unchanged sentence

Non-vested at December 31, 2020

Non-vested at June 30, 2020

The following table summarizes the impact to the Consolidated Statement of Operations from Continuity Awards for the period ended June 30, 2021.

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Vested ( 43 ) ( 257,536 )

Forfeited — —

Non-vested at September 30, 2021

The following table summarizes the impact to the Consolidated Interim Statement of Operations from Continuity Awards for the period ended September 30, 2021.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021 2020 2021 2020

Compensation expense $ — $ 1 $ 5 $ 3

1 unchanged sentence

Earnings Per Share

The details of the earnings per share (“EPS”) calculations for the three and six months ended June 30, 2021 and 2020 are as follows:

Ended June 30,

The details of the earnings per share (“EPS”) calculations for the three and nine months ended September 30, 2021 and 2020 are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions except per share)

Net income (loss)

Net income $ 63 $ 11 $ 367 $ 54

preferred stock dividend ( 36 ) — ( 60 ) —

Net income (loss) available to common shareholders

Net income available to common shareholders $ 27 $ 11 $ 307 $ 54

Weighted average common shares outstanding 65,056,274 75,739,152 70,802,999 75,456,358

Ended June 30,

EPS – Basic $ 0.42 $ 0.15 $ 4.34 $ 0.72

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in millions except per share)

Net income (loss)

Net income $ 63 $ 11 $ 367 $ 54

preferred stock dividend ( 36 ) — ( 60 ) —

Net income (loss) available to common shareholders

Net income available to common shareholders $ 27 $ 11 $ 307 $ 54

Weighted average common shares outstanding – Basic 65,056,274 75,739,152 70,802,999 75,456,358

1 unchanged sentence

contingently issuable shares

25,069 204,842 8,289 667,190

Dilutive effect of Series A Preferred Stock 247,763,126 — 138,852,987 —

2 unchanged sentences

Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of Common Stock equivalents using the treasury stock method and the average market price of our Common Stock for the period.

The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period.

For the three and six months ended June 30, 2021, the weighted number of stock options excluded from the computations was 128,499 and 263,245 respectively.

The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the Common Stock during the period.

For the nine months ended September 30, 2021, the weighted number of stock options excluded from the computation was 175,497 .

As described in Note 20, Stock-Based Compensation , as part of emergence from Chapter 11, these stock options were cancelled under the Plan as of the effective date.

3 unchanged sentences

On the Petition Date, the Debtors each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

The Chapter 11 Cases are jointly administered under the caption “In re Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Plan.

The Chapter 11 Cases were jointly administered under the caption “In re:

Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Plan.

On April 26, 2021, the Bankruptcy Court entered the Confirmation Order, among other things, confirming the Plan.

On the Effective Date, the conditions to effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

Since the Effective Date, the reorganized

Debtors have been administering and reconciling outstanding proofs of claim and proofs of interest filed against the Debtors.

All of the Chapter 11 Cases other than the main lead Chapter 11 Case of the Company have been closed, the main Chapter 11 Case of the Company will remain open until all proofs of claim and proofs of interest are fully administered.

See Note 2, Plan of Reorganization , for more information.

Obligations Payable to Honeywell

Honeywell is a defendant in asbestos-related personal injury actions mainly related to its legacy Bendix friction materials (“Bendix”) business.

The Bendix business manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form.

Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements.

Certain operations that were part of the Bendix business were transferred to Garrett.

In connection with the Spin-Off, Garrett ASASCO, a wholly owned indirect subsidiary of the Company, entered into the Honeywell Indemnity Agreement with Honeywell on September 12, 2018.

As of the Spin-Off date of October 1, 2018, Garrett ASASCO was obligated to make payments to Honeywell in amounts equal to 90 % of certain Honeywell asbestos-related liability payments and accounts payable, primarily related to the Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Business, including the legal costs of defending and resolving such liabilities, less 90 % of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities.

Pursuant to the terms of this Honeywell Indemnity Agreement, Garrett ASASCO was responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Euro-to-U.S.

dollar exchange rate determined by Honeywell as of a date within two business days prior to the date of the Distribution (1.16977 USD = 1 EUR) equivalent of $ 175 million in respect of such liabilities arising in any given calendar year.

The payments that Garrett ASASCO would have been required to make to Honeywell pursuant to the terms of the Honeywell Indemnity Agreement would not have been deductible for U.S.

federal income tax purposes.

The Honeywell Indemnity Agreement provided that the agreement would terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $ 25 million as converted into Euros in accordance with the terms of the agreement.

During the first quarter of 2020, Garrett ASASCO paid Honeywell the Euro-equivalent of $ 35 million in connection with the Honeywell Indemnity Agreement.

Honeywell and Garrett agreed to defer the payment under the Honeywell Indemnity Agreement due May 1, 2020 to December 31, 2020 (the “Q2 Payment”).

On December 2, 2019, the Company and its subsidiary Garrett ASASCO, filed a Summons with Notice in the Commercial Division of the Supreme Court of the State of New York, County of New York (the “NY Supreme Court”) commencing an action (the “Action”) against Honeywell, certain of Honeywell’s subsidiaries and certain of Honeywell’s employees for declaratory judgment, breach of contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, corporate waste, breach of the implied covenant of good faith and fair dealing, and unjust enrichment.

On January 15, 2020, the Company and Garrett ASASCO, filed a Complaint in the NY Supreme Court in connection with the Action.

The lawsuit arose from the Honeywell Indemnity Agreement.

The Company sought declaratory relief;

compensatory damages in an amount to be determined at trial;

rescission of the Honeywell Indemnity Agreement;

attorneys’ fees and costs and such other and further relief as the Court deemed just and proper.

Among other claims, Garrett asserted that Honeywell was not entitled to indemnification because it improperly sought indemnification for amounts attributable to punitive damages and intentional misconduct, and because it failed to establish other prerequisites for indemnification under New York law.

Specifically, the claim asserted that Honeywell had failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification.

The Action sought to establish that the Honeywell Indemnity Agreement was not enforceable, in whole or in part.

On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint”.

On September 20, 2020, Garrett and certain of its subsidiaries each filed the Chapter 11 Cases.

On September 23, 2020, Garrett removed the case to the United States District Court for the Southern District of New York, and on September 24, 2020, the case was referred to the Bankruptcy Court.

On October 13, 2020, Honeywell filed a motion to dismiss in the Bankruptcy Court.

A pre-trial conference took place on October 22, 2020.

The Court heard argument on Honeywell’s pending motion to dismiss on November 18, 2020.

On November 2, 2020, the Garrett entities that are Debtors and Debtors in Possession filed a Motion Pursuant to Sections 105(a) and 502(c) To Establish Procedures For Estimating The Maximum Amount Of Honeywell’s Claims And Related Relief (“Motion”).

The Court heard argument on the Motion on November 18.

The Court ordered an estimation proceeding to take place to estimate all of Honeywell’s claims against the Garrett entities that were Debtors and Debtors in Possession.

On September 12, 2018, we also entered into a tax matters agreement with Honeywell (the “Tax Matters Agreement”), which governs the respective rights, responsibilities and obligations of Honeywell and us after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests).

The Tax Matters Agreement generally provided that, following the Spin-Off date of October 1, 2018, we were responsible and would indemnify Honeywell for all taxes, including income taxes, sales taxes, value-added and payroll taxes, relating to Garrett for all periods, including periods prior to the completion date of the Spin-Off.

Among other items, as a result of the mandatory transition tax imposed by the Tax Cuts and Jobs Act, Garrett ASASCO was required to make payments to a subsidiary of Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to us, as determined by Honeywell.

Additionally, the Tax Matters Agreement provided that Garrett ASASCO was to make payments to a subsidiary of Honeywell for a portion of Honeywell’s net tax liability under Section 965(h)(6)(A) of the Internal Revenue Code for mandatory transition taxes that Honeywell determined is attributable to us (the “MTT Claim”).

Following the Spin-Off, Honeywell asserted that Garrett ASASCO was obligated to pay $ 240 million to Honeywell for the MTT Claim under the Tax Matters Agreement.

Accordingly, and in connection with the Tax Matters Agreement, we made payments to Honeywell, under protest, for the Euro-equivalent of $ 18 million and $ 19 million during 2019 and the fourth quarter of 2018, respectively, for the MTT Claim.

On October 30, 2020, however, Honeywell filed an SEC Form 10-Q for the quarterly period ended September 30, 2020, reporting that its claim against us under the Tax Matters Agreement, including the MTT Claim, was $ 273 million.

Under the terms of the Tax Matters Agreement, Garrett ASASCO was required to pay this amount in Euros, without interest, in five annual installments, each equal to 8 % of the aggregate amount, followed by three additional annual installments equal to 15 %, 20 % and 25 % of the aggregate amount, respectively.

Following the Spin-Off in October 2018, Garrett ASASCO paid the first annual installment in October 2018, with subsequent annual installments to be paid in April of each year.

The annual installment due on April 1, 2020 was initially deferred to December 31, 2020 in agreement with Honeywell, and subsequently not paid as a result of the automatic stay applicable to the Debtors under the Bankruptcy Code as a result of the Chapter 11 Cases.

On July 17, 2020, we provided notice to Honeywell asserting that Honeywell had caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable.

The value and validity of Honeywell’s claims under the Tax Matters Agreement, including the MTT Claim, were subsequently litigated in the Chapter 11 Cases.

As described above, the Plan, as confirmed by the Bankruptcy Court, includes a global settlement with Honeywell providing for, among other things, the full and final satisfaction, settlement, release, and discharge of all liabilities under or related to the Tax Matters Agreement.

In addition, the Tax Matters Agreement addresses the allocation of liability for taxes incurred as a result of restructuring activities undertaken to effectuate the Spin-Off.

The Tax Matters Agreement also provides that we are required to indemnify Honeywell for certain taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S.

federal, state and local income tax law, as well as foreign tax law.

Further, the Tax Matters Agreement also imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, redemptions or repurchases, business combinations, sales of assets and similar transactions) that are designed to address compliance with Section 355 of the Internal Revenue Code of 1986, as amended, and are intended to preserve the tax-free nature of the Spin-Off.

On December 18, 2020, Honeywell filed proofs of claim in the Chapter 11 Cases, asserting that the Company owes at least $ 1.9 billion.

The Bankruptcy Court was scheduled to estimate the amount of Honeywell’s claims in an estimation proceeding that was scheduled to commence on February 1, and subsequently cancelled.

On January 11, 2021, the Company announced that it had agreed to settle Honeywell’s claims as part of the Plan.

The Plan was confirmed by the Bankruptcy Court and went effective on the Effective Date, April 30, 2021.

The Company emerged from bankruptcy on the Effective Date.

Under the Plan settlement, which is now binding and effective, Honeywell received a $ 375 million cash payment as well as Series B Preferred Stock payable in instalments of $ 35 million in 2022, and $ 100 million annually from 2023-2030.

The Company has the option to prepay the Series B Preferred Stock in full at any time at a call price equivalent to $ 584 million as of the Effective Date (representing the present value of the instalments at a 7.25 % discount rate).

The Company also has the option to make a partial payment of the Series B Preferred Stock, reducing the present value to $ 400 million, at any time within 18 months of the Effective Date.

Pursuant to the Plan, on the Effective Date, the obligations of the Debtors under each of the following agreements were cancelled and the applicable agreements governing such obligations were terminated:

(a) that certain Indemnification Guarantee Agreement, dated September 27, 2018, by and among Honeywell ASASCO 2 Inc., Garrett ASASCO Inc., and the other Guarantors party thereto, as may be amended, restated, supplemented or otherwise modified from time to time prior to the Effective Date (the “Honeywell Indemnification Guarantee Agreement”);

and Honeywell International Inc.;

and Garrett ASASCO Inc., as each may be amended, restated, supplemented or otherwise modified from time to time prior to the Effective Date (collectively, the “Honeywell Indemnity Agreement”);

(c) that certain Tax Matters Agreement, dated September 12, 2018, by and among Honeywell International Inc., GMI, Honeywell ASASCO Inc.

The Plan as confirmed by the Bankruptcy Court includes a global settlement with Honeywell providing for, among other things, the full and final satisfaction, settlement, release, and discharge of all liabilities under or related to the Honeywell Agreements.

Securities Litigation

34 unchanged sentences

On February 25, 2021, plaintiffs filed a Consolidated Amended Complaint for Violation of the federal securities laws.

The Company’s insurer, AIG has accepted the defense, subject the customary reservation of rights.

The bankruptcy court set a bar date of March 1, 2021 for current and former shareholders to file claims against the Debtors arising from rescission of a purchase or sale of Common Stock of Garrett Motion Inc., for damages arising from the purchase or sale of Common Stock of Garrett Motion Inc., or for reimbursement or contribution allowed under section 502 of the Bankruptcy Code on account of such claims arising (or deemed to have arisen) prior to the Petition Date for all securities claims arising prior to the Petition Date.

The Company’s insurer, AIG, has accepted the defense, subject to the customary reservation of rights.

The bankruptcy court set a bar date of March 1, 2021 for current and former shareholders to file claims against the Debtors arising from rescission of a purchase or sale of Old Common Stock, for damages arising from the purchase or sale of Common Stock of Garrett Motion Inc., or for reimbursement or contribution allowed under section 502 of the Bankruptcy Code on account of such claims arising (or deemed to have arisen) prior to the Petition Date for all securities claims arising prior to the Petition Date.

We are not yet able to assess the likelihood that any such claims will be allowed.

To the extent allowed, each holder of such claims pursuant to the Plan would be entitled to receive, (x) its pro rata share of the aggregate cash payments received or recoverable from any insurance policies of the Company on account of any such allowed claims and (y) solely to the extent that such payments are less than the amount of its allowed claim, payment in full of the remaining amount of its allowed claim, at the option of the reorganized Debtors, in cash or a number of shares of Garrett Common Stock at a value of $ 6.25 per share.

The Company has agreed with the Gabelli Entities and their lead counsel to permit a class claim to be recognized in the bankruptcy court and to have securities claims against Garrett Motion Inc.

to be litigated in the district court alongside the Consolidated D&O Action.

To the extent allowed, each holder of such claims pursuant to the Plan would be entitled to receive (i) its pro-rata share of the aggregate cash payments received or recoverable from any insurance policies of the Company on account of any such allowed claims and (ii) solely to the extent that such payments are less than the amount of its allowed claim, payment in

full of the remaining amount of its allowed claim, at the option of the reorganized Debtors, in cash or a number of shares of Common Stock at a value of $ 6.25 per share.

The Company agreed with the Gabelli Entities and their lead counsel to permit a class claim to be recognized in the bankruptcy court and to have securities claims against the Company to be litigated in the district court alongside the Consolidated D&O Action.

The Gabelli Entities have agreed that any recoveries against Garrett Motion Inc.

3 unchanged sentences

The Gabelli Entities were authorized, and on July 22, 2021 filed a second amended complaint to add claims against Garrett Motion Inc.

Defendants’ motion to dismiss with respect to claims asserted against all defendants (current and former officers and directors and Garrett Motion Inc.) is currently expected to be filed on or before August 11, 2021.

Lead plaintiffs’ opposition to the motion to dismiss is due on or before October 11, 2021, and the defendants’ reply briefing is due on or before November 24, 2021.

Make-Whole Litigation

On November 13, 2020, certain of the Debtors (the “Plaintiffs”) filed a complaint in the Bankruptcy Court against the indenture trustee (the “Indenture Trustee”) of the 5.125% senior notes due 2026 (the “Senior Notes”) seeking declaratory judgment on two claims for relief that the Debtors did not owe, and the holders of the Senior Notes (the “Noteholders”) were not entitled to, any make-whole premium under the Indenture (the “Make-Whole” and such litigation, the “Make-Whole Litigation”).

Certain Noteholders contended in the Chapter 11 Cases that the Noteholders were entitled to payment of the Make-Whole under the terms of the Indenture, which provided for the payment of the Make-Whole if the Debtors exercised their right to redeem the Senior Notes prior to maturity, as a result of the Debtors’ commencement of their Chapter 11 Cases.

The Plaintiffs’ position was that the Noteholders were not entitled to any Make-Whole because the Debtors had not exercised their right of redemption as contemplated by the Indenture and, in the alternative, that the Make-Whole should be disallowed as unmatured interest pursuant to Section 502(b)(2) of the Bankruptcy Code.

On January 8, 2021, the Indenture Trustee filed an answer to the Debtors’ complaint.

On January 11, 2021, the Company announced that it had agreed to settle the Make-Whole Litigation as part of the transactions and settlements embodied in the Plan.

The Plan was approved by the Bankruptcy Court and went effective on the Effective Date, April 30, 2021.

Pursuant to the settlement embodied in the Plan, the Make-Whole was allowed as a claim in the amount of $ 15 million.

The Make-Whole Litigation was dismissed with prejudice on the Effective Date, in accordance with the approved settlement terms.

On August 11, 2021, Garrett Motion Inc., Olivier Rabiller, Alessandro Gili, Peter Bracke, Sean Deason, Russell James, Carlos Cardoso, Maura Clark, Courtney Enghauser, Susan Main, Carsten Reinhardt, and Scott Tozier filed a motion to dismiss with respect to claims asserted against them.

On the same day, Su Ping Lu, who is represented separately, filed a motion to dismiss with respect to the claims asserted against her.

Lead plaintiffs’ opposition to the motions to dismiss was filed on October 26, 2021, and reply briefs are due on or before December 8, 2021.

Brazilian Tax Matters

1 unchanged sentence

The infraction notice results in a loss contingency that may or may not ultimately be incurred by the Company.

The estimated total amount of the contingency as of June 30, 2021 was $ 31 million including penalties and interest.

The estimated total amount of the contingency as of September 30, 2021 was $ 30 million including penalties and interest.

The Company appealed the infraction notice on October 23, 2020.

5 unchanged sentences

We are subject to other lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property and environmental, health and safety matters.

We recognize a liability for any contingency that is probable of occurrence and reasonably estimable.

We recognize a liability for any contingency that is probable of occurring and reasonably estimable.

We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.

2 unchanged sentences

defined benefit pension plans.

Significant plans outside of the U.S.

Significant plans outside the U.S.

are in Switzerland and Ireland.

Other pension plans outside of the U.S.

Other pension plans outside the U.S.

are not material to the Company, either individually or in the aggregate.

3 unchanged sentences

We expect to make contributions of cash and/or marketable securities of approximately $ 7 million to our non-U.S.

pension plans to satisfy regulatory funding standards in 2021, of which $ 3 million has been contributed through the first six months of the year.

pension plans to satisfy regulatory funding standards in 2021, of which $ 6 million has been contributed through the first nine months of the year.

Net periodic benefit costs for our significant defined benefit plans include the following components:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Plans Non-U.S.

2021 2020 2021 2020 2021 2020 2021 2020

(Dollars in millions)

Service cost $ — $ — $ 3 $ 2 $ 1 $ 1 $ 8 $ 7

Interest cost 1 1 — — 3 4 1 1

Expected return on plan assets ( 3 ) ( 3 ) ( 2 ) ( 1 ) ( 8 ) ( 8 ) ( 5 ) ( 4 )

Amortization of prior service (credit) — — — — — — ( 1 ) —

$ ( 2 ) $ ( 2 ) $ 1 $ 1 $ ( 4 ) $ ( 3 ) $ 3 $ 4

For both our U.S.

defined benefit pension plans, we estimate the service and interest cost components of net period benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows.

defined benefit pension plans, we estimate the service and interest cost components of net periodic benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows.

This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements