Dana granted court OK for Spicer joint venture master purchase agreement

By Caroline Salls

Pittsburgh, June 20 - Dana Corp. obtained court approval of a master purchase agreement with Spicer SA de CV, Desc Automotriz SA de CV, Inmobiliaria Unik SA de CV and Dana Holdings Mexico S de RL de CV related to the dissolution of the Spicer joint venture, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The agreement provides for the dissolution of the joint venture between Desc Automotriz and Dana, consisting of Spicer and its subsidiaries.

Under the agreement, Dana will exchange its current minority interest in Spicer, plus a cash payment of $19.5 million, for a 100% interest in some Spicer subsidiaries, which manufacture axles, driveshafts, gears, forgings and castings.

As the Spicer joint venture is currently organized, Dana owns 5.33 billion Spicer shares, representing 48.803% of the outstanding shares of Spicer.

Upon completion of the transaction, Desc Automotriz will have 100% ownership of Spicer, Spicer will retain its 99.99% ownership of some of its subsidiaries and Dana Mexico will acquire 100% ownership of other Spicer subsidiaries.

Dana will enter into two hybrid loan securities agreements in a total amount of $19.5 million with some of the Spicer subsidiaries, which will use the proceeds to declare a cash dividend of $19.5 million to Spicer.

Desc Automotriz will issue a $166 million promissory note to Dana, representing the full purchase price of the Dana joint venture shares, and Dana will transfer the note to Dana Mexico, which will deliver the note to Spicer in payment in full for the shares.

The remaining $1 million of the hybrid loans will be used to purchase a parcel of land, which is part of the businesses that Dana Mexico is acquiring, but which is owned by an affiliate of Desc Automotriz.

Also under the agreement, Dana will continue its obligations under the trademark license agreement with Transmisiones TSP, SA de CV regarding the license of the Spicer trademark.

In addition, Dana and various other parties will enter into ancillary agreements, including an agreement releasing some claims between Dana, Dana Mexico and Spicer units, as well as Desc Automotriz, Spicer and other Spicer units; an agreement permitting Desc Automotriz and its affiliates to use the TF Victor trademark; and a software license agreement between Dana and some of the Spicer units permitting the latter to use some computer software programs.

Also, under the agreement, Dana will pay to Spicer and its subsidiaries the $19.8 million due for goods or services provided pre-bankruptcy, 48.803% of which will remain in the units to be acquired by Dana.

Dana will also reimburse Spicer for expenditures in an amount not to exceed $7 million, made by Spicer on Dana's behalf to prepare for and execute projects.

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

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