Appaloosa claims it has 'materially superior' proposal for Dana restructuring

By Lisa Kerner

Charlotte, N.C., July 19 - Dana Corp. investor Appaloosa Management LP said the company's efforts to "pursue a plan sponsored by Centerbridge Capital Partners, LP have been fundamentally flawed and, if continued, will yield far less than the maximum recoveries available to stakeholders."

Instead, Appaloosa said it has a proposal that is "materially superior."

Appaloosa made its claim in a letter to the company's board and included in a schedule 13D filing with the Securities and Exchange Commission.

According to Appaloosa, Dana's proposed transaction with Centerbridge and the various unions is structured "to effectively preclude competing proposals."

Appaloosa, without the benefit of due diligence, provided Dana with a draft proposal of its own for discussion purposes. The investor would agree to eliminate and waive any break-up fee, enhance the conversion price and agree to the elimination of barriers to the submission of competing proposals.

In comparing the two proposals, Appaloosa said its proposal is "materially superior" to Centerbridge's because it appropriately values the company. In addition, the proposal gives creditors full recovery on their claims while providing a "meaningful" return to shareholders.

Appaloosa said its proposal also "ensures that management will be accountable to stakeholders on a going-forward basis."

The investor implored Dana to "review and reconsider the company's current restructuring strategy."

As previously reported, Dana reached a series of interrelated union and investment agreements with the United Auto Workers, United Steel Workers and Centerbridge Capital Partners, LP to reduce the company's operating costs as it emerges from bankruptcy. The agreements are expected to lower Dana's labor costs and replace the company's health care and long-term disability obligations for retirees and employees represented by these unions with Voluntary Employees' Beneficiary Association trusts funded in part by Dana.

Under the investment agreement, Centerbridge will purchase up to $500 million of convertible preferred stock of the reorganized Dana. In addition, it will facilitate an additional investment of up to $250 million in convertible preferred stock.

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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