A U.S. federal court on Wednesday confirmed Dana
Corp.'s Chapter 11 reorganization plan, paving the way for the
auto-parts supplier to emerge from bankruptcy by the end of January.
After more than two days of hearings, Judge Burton Lifland of the
U.S. Bankruptcy Court in Manhattan approved the plan, which will
repay Dana's unsecured creditors between 72 cents and 86 cents for
every dollar of the US$3 billion they're owed.
The company said 96 per cent of its unsecured creditors voted in
favor of the reorganization plan.
``The plan is feasible, fair and equitable,'' Lifland said.
Dana, based in Toledo, Ohio, will emerge from bankruptcy a leaner
company after having shed about 8,000 of its 44,000 employees and
shut down noncore businesses. Much of the work force reduction was
the result of the sale of various Dana businesses.
Dana said its bankruptcy reorganization has resulted in annual
savings of between $440 million and $475 million. In court papers,
the company said it managed to squeeze about $180 million in annual
price increases from its customers.
Dana plans to borrow $2 billion from Citigroup Global Markets
Inc., Lehman Brothers and Barclays Capital to supplement $790
million in new equity to fund its exit from bankruptcy protection.
The company plans to sell as much as $540 million of new preferred
stock to qualified unsecured creditors through a rights offering.
Private-equity firm Centerbridge Capital Partners, which has
agreed to purchase $250 million in new Series A preferred shares,
will backstop $250 million of the $540 million rights offering. A
group of Dana bondholders will backstop the sale of the remaining
$290 million in Series B preferred shares.
The reorganized Dana will have a nine-member board of directors
consisting of some of the biggest names in the automotive industry,
including John Devine, former chief financial officer of General
Motors Corp., Jerome York, former chief financial officer of
Chrysler Corp. and Richard Gephardt, a former U.S. representative
with strong ties to organized labor. Dana's chief executive, Michael
Burns, will retain his post.
Dana, which makes axles, drive shafts and other parts, entered
bankruptcy in March 2006 amid a downturn in the U.S. auto industry.
Other parts suppliers also fell into bankruptcy, including Delphi
Corp., GM's former parts unit, and Dura Automotive Systems.