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Bankruptcy court confirms Dana Corp.'s plan to exit Chapter 11

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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.

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Bankruptcy court confirms Dana Corp.'s plan to exit Chapter 11
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