Tower Automotive agrees to deem preferred securityholders as creditors

By Caroline Salls

Pittsburgh, Sept. 7 - Tower Automotive, Inc. reached an agreement with Wells Fargo Bank, NA that deems holders of trust preferred securities to be creditors of the company and parties-in-interest in Tower's Chapter 11 case, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Wells Fargo is the successor indenture trustee for the company's $266.75 million in 6¾% convertible subordinated debentures due June 30, 2018 as well as the successor property trustee for a trust created on June 9, 1998, which issued preferred securities and used the proceeds of its sale of the preferred securities to purchase the debentures from Tower.

According to the filing, Wells Fargo notified Tower that it believed the declaration of trust requires it to liquidate the trust, and Wells Fargo asked Tower to issue new replacement debentures directly to the preferred securityholders.

Tower refused to issue the new securities, and Tower and Wells Fargo negotiated a compromise under which the preferred securityholders can participate directly in Tower's reorganization case, relieving Wells Fargo of its duties under the trust.

Under the agreement, each preferred securityholder will be granted standing to vote on the terms of any Tower plan of reorganization, provided that the company reserves the right to say that the preferred securityholders are deemed to reject the plan and therefore not entitled to vote.

In addition, Wells Fargo will be deemed not to be a Tower creditor with respect to the debentures and will have no standing to vote on the plan.

The agreement does not affect Wells Fargo's position on the official committee of unsecured creditors.

The Novi, Mich.-based auto parts maker filed for bankruptcy on Feb. 1, 2005. Its Chapter 11 case number is 05-10578.

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