Dura subordinated noteholders' plan distribution request denied

By Caroline Salls

Pittsburgh, Dec. 7 - Federal judge Kevin J. Carey has denied a request by two holders of Dura Automotive Systems, Inc.'s subordinated notes for a ruling that the company should be legally required to distribute shares of new common stock to the noteholders and to let them participate in the company's rights offering.

Plaintiffs Thomas A. and Pattiann Kurak, who claim to hold $81.5 million of Dura Operating Corp.'s subordinated notes, filed a lawsuit on Sept. 19 in the U.S. Bankruptcy Court for the District of Delaware alleging that Dura's plan improperly excludes them from all plan distributions.

In his ruling filed Friday, Carey said the Kurak's interpretation of one clause in the subordinated notes indenture "is inconsistent with the broader context" of the indenture.

"When read as a whole, the subordinated note indenture clearly manifests the intent to assure payment in full of the senior notes before permitting payment (in whatever form) to the subordinated noteholders," Carey said in the ruling.

Carey said Kurak's argument was that the "X-Clause" included in the notes indenture was intended to carve out distributions from subordination provisions.

However, Carey said the clause only provides limited exceptions to the subordination provisions, and it must be read as only one part of the indenture.

Dura, a Rochester Hills, Mich.-based automotive parts maker, filed for bankruptcy on Oct. 30, 2006. Its Chapter 11 case number is 06-11202.

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