Dana asks for court permission to enter settlement agreement with Affinia

By Jennifer Lanning Drey

Portland, Ore., Nov. 21 - Dana Corp. requested court approval of a settlement agreement that would resolve various disputes between the company and Affinia Group Inc., according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, Dana contends that Affinia is in possession of a $32.5 million tax refund to which Dana is entitled under a purchase agreement related to the sale of Dana's aftermarket business to Affinia in 2004.

Affinia previously expressed its intention to defend against the allegations, according to court documents.

Additionally, Affinia also previously objected to Dana's motion to reject the purchase agreement and other agreements between the two companies.

Under the settlement agreement between the two companies, the purchase agreement would be terminated and Affinia would return the C$40.0 million tax refund to Dana minus C$8.7 million, which is the amount Affinia paid to the Canadian government for the 2002 to 2004 tax year. Affinia would also transfer to Dana any additional amounts it receives on account of the tax refund.

Dana would indemnify Affinia from additional income tax owed to the Canadian government.

The settlement agreement also solves numerous smaller-scale disputes between Dana and Affinia related to claims under the purchase agreement.

Therefore, also under the settlement, Affinia will be allowed a $429,579 general unsecured non-priority claim against Dana and a $21.7 million general unsecured non-priority claim against Dana.

A hearing has been scheduled for Dec. 5.

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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