Auburn Hills’ Dura Automotive Systems, a global automotive supplier specializing in the design, engineering, and manufacturing of automotive mobility products, plans to implement a restructuring process that includes filing for Chapter 11 Bankruptcy.
The plan is expected to facilitate new capital and expedite going-concern sales processes. To implement the restructure, the company and its domestic subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of Tennessee. Dura’s non-U.S. subsidiaries are not part of the Chapter 11 filing.
Dura has obtained a commitment from Ark II CLO 2001-1 Ltd., an entity controlled by Lynn Tilton, Dura’s CEO and majority owner, for a $77 million debtor-in-possession financing facility, including $50 million of new money, the proceeds of which will be used to fund the company’s ongoing business operations, including capital expenditures for future platforms.
This facility will allow Dura to continue business as usual while pursuing a court-supervised, going-concern sale, commonly referred to as a 363 sale. In connection with this process, an entity controlled by Tilton has proposed to purchase Dura’s assets and assume all customers, trade, and employee obligations, including pension obligations, subject to higher and better bids from other potential purchasers.
“The financing Ms. Tilton has agreed to supply will provide Dura with much-needed capital to fund growth programs that we have recently been awarded,” says Kevin Grady, executive vice president and CFO of DURA. “These important actions will allow us to continue our operations as normal. Most critically, this expedited sales process will not result in any supply disruptions or trade impairments.”
The company expects the expedited sale process, including the closing on the 363 sale, will be completed within about 120 days. A transaction committee consisting of two independent directors has been appointed to assist with the sale.
“Ongoing constituent disputes have made it impossible for Dura to access ordinary course, yet essential, financing,” says Tilton. “The actions announced today will allow the company to move forward and access the necessary capital that will fuel its growth. I look forward to working closely with Dura’s leadership and its talented and dedicated work force throughout this process as we continue the transformation of this great company.”
Through the financing commitments and acquisition proposal, Dura intends to facilitate a restructuring that will position the company for the future by resolving its near-term liquidity needs, outstanding ownership issues, and allow the company to capitalize on its quality manufacturing, workforce, and new business opportunities.
The company plans, subject to approval by the bankruptcy court, to pay wages and benefits to employees in the ordinary course, including the continuation of its normal course funding of its pension obligations. Dura has filed several other customary first day motions with the court, including with respect to its cash management procedures, which will allow the company to conduct business without interruption while it pursues the 363 sale on an expedited basis. The company will pay its suppliers and other vendors in the ordinary course for parts supplied and work performed throughout the bankruptcy process.
Dura’s non-U.S. operations in Asia, Europe, South America, and Mexico are not included in the Chapter 11 cases, and their operations will continue in the ordinary course.
“Our business outside the U.S. is strong and stable, and we expect no changes in our international operations,” says Grady.
Dura was founded in 1914 and has more than 9,400 employees in 14 countries.