Dana requests court approval of investor backstop agreement, files first amended plan of reorganization

By Jennifer Lanning Drey

Portland, Ore., Oct. 19 - Dana Corp. requested court approval of an agreement with a bondholder investor group, under which the bondholders will backstop the $250 million of convertible preferred stock that is not backstopped by Centerbridge LP under its investor agreement, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The investor group will further backstop an additional $40 million of series B preferred stock.

Accordingly, Dana filed a first amended plan of reorganization and related disclosure statement Friday to reflect the agreement.

The preferred stock will be offered to qualified investors, with the bondholder investor group agreeing to purchase up to 2.9 million unsubscribed shares of series B preferred stock for an aggregate price of $290 million, or $100.00 per share, in cash.

Dana said the backstop commitment will ensure that the company can meet its obligations under its investment agreement with Centerbridge.

The backstop investors are each members of Dana's ad hoc steering committee and hold $800 million of Dana bonds.

In exchange for the backstop commitment, Dana will pay the backstop investors an $11.6 million commitment fee.

Additionally, Dana said that as part of the discussions leading up to the backstop commitment letter, the parties agreed to increase Centerbridge's expense reimbursement to $5 million from $4 million.

As previously reported, the investment agreement between Dana and Centerbridge provides for Centerbridge to purchase up to $500 million of convertible preferred stock of the reorganized Dana and facilitate an additional investment of up to $250 million of convertible preferred stock.

The series A and series B preferred shares will be convertible into the common stock of reorganized Dana at a conversion price of 83% of the value that is determined by calculating the 20-day volume-weighted average trading price of Dana's new common stock.

Plan amendments

In conjunction with the backstop motion, Dana filed a first amended plan of reorganization and related disclosure statement to reflect the new investor agreement.

The plan amendment increases the number of series B preferred stock shares by 400,000.

Dana's first amended plan of reorganization also changed the estimated recovery for all bondholder classes to 72% to 86%.

The previous plan estimated a 69% to 90% recovery for holders of the class.

Bondholders collectively hold an estimated $2.5 billion to $3.0 billion of claims.

The company also said the plan amendment resolves an issue with its creditors committee by establishing that ineligible investors with allowed claims will receive their share of the plan's cash settlement pool, not exceeding $0.85 per $1.00 of allowed general unsecured claim.

Creditor treatment

Under Dana's first-amended plan of reorganization, creditor treatment is as follows:

• Holders of an estimated $462.1 million of claims from Dana's 5.85% bonds will receive new common stock and a distribution of excess cash for an estimated recovery of 72% to 86%;

• Holders of an estimated $953.2 million of claims from Dana's 6½% and 7% bonds will receive new common stock and a distribution of excess cash for an estimated recovery of 72% to 86%;

• Holders of an estimated $128.4 million of claims from Dana's 9% bonds will receive new common stock and a distribution of excess cash for an estimated recovery of 72% to 86%;

• Holders of an estimated $77 million of claims from Dana's 10 1/8% bonds will receive new common stock and a distribution of excess cash for an estimated recovery of 72% to 86%;

• Holders of an estimated $879.3 million to $1.6293 billion general unsecured claims will receive new common stock and a distribution of excess cash for an estimated recovery of 72% to 86%;

• Holders of $1.1 billion in union claims will receive from the settlement agreement will receive a Voluntary Employee Benefit Association contribution for an estimated recovery of 69%;

• Holders of $325 million of general unsecured claims from Dana Credit Corp.'s bonds will receive cash for Dana's liability under the bonds, for a 35% recovery;

• Asbestos personal injury claims will be reinstated unimpaired;

• Holders of Dana common stock will receive a contingent residual interest in the dispute unsecured claims reserve, for an estimated recovery of zero.

Dana's plan confirmation hearing is scheduled for Dec. 10.

Dana, a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets, filed for bankruptcy on March 3, 2006. Its Chapter 11 case number is 06-10354.

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