Dana acknowledges talks with lenders on new facility, won't say much else

By Paul Deckelman

New York, Feb. 24 - Dana Corp. acknowledged Friday that it is in talks with lenders on possible new financing - but the embattled Toledo, Ohio-based automotive systems maker declined to offer any further details.

A spokesman for the company also told Prospect News that Dana would have no comment on market speculation that its financing efforts are in trouble or on published reports that the company has hired restructuring specialist Miller Buckfire & Co.

Rumors that the effort to get a new secured debt facility was meeting resistance were cited by traders on Thursday as one possible explanation for the sharp fall in the company's bonds during that day's session, and for a pronounced widening out of spreads in Dana debt in the credit default swaps market, which occurred in tandem with a slide in the company's stock price.

The Dana spokesman also declined to comment on market movements of Dana securities.

Dana indicated on its most recent conference call that it was in the market for a new facility that would be larger than the combination of its current $400 million revolving credit facility, and a $275 million accounts receivable facility, which is scheduled to expire on April 15.

The company had said in a Jan. 18 filing with the Securities and Exchange Commission that was in discussions with its bank group to modify its bank facility or refinance it with a new facility, and that it expected to have a new loan, or amendments to its current loan, in place by May 31, at the outside.

Dana said at that time that it expects cash flows from operations and proceeds from divestitures, combined with the modified or new bank facility, to provide sufficient liquidity for the next 12 months.

But according to the filing, Dana has a long list of things it needs to do with whatever cash it borrows, including debt service obligations, working capital requirements, realignment obligations, capital spending and investments related to a joint venture in China and the dissolution of a joint venture in Mexico.

According to analyst Shelly Lombard of the Gimme Credit bond market research service, "the problem is that bond covenants appear to limit the size of any secured facility to about $750 million which isn't much larger than the $675 million provided by the two current deals. So the banks could have balked at providing a larger facility because Dana was unable to provide enough collateral."

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