Tower Automotive restructuring term sheet approved

By Caroline Salls

Pittsburgh, April 9 - Tower Automotive, Inc. obtained court approval of a restructuring term sheet, under which the company will sell substantially all of its assets through a Chapter 11 plan for $1 billion to funds and accounts to be designated by Cerberus Capital Management, LP, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the transaction provides for payment in full of obligations under Tower's debtor-in-possession credit facility and second-lien loan facility, assumption of the company's pensions, which have a minimum funding commitment of $40 million, and recovery for unsecured creditors.

The term sheet provides a package of recovery for unsecured creditors, including $10 million in cash, avoidance actions not being purchased by Cerberus and a commitment from Cerberus to fund up to $2 million of the costs and expenses of the unsecured creditor liquidating trust.

Tower said its unsecured creditors committee supports the transaction and has signed the term sheet.

Under the term sheet, Tower is expected to file a plan of reorganization by April 20.

If competing bids are received for Tower's assets, an auction will be held June 25.

Closing is expected to occur by July 31.

Initial overbids must exceed Cerberus' transaction price by $10 million, and subsequent bids must be at least $5 million higher than the previous bid. Each bid must include a $25 million deposit.

If the company decides not to continue with the transaction outlined in the term sheet, Tower will pay up to $4 million of Ceberus' expenses and Cerberus can seek payment of an unopposed substantial contribution claim of up to $15 million.

If the company decides to go with a transaction involving the sale of only part of its assets, Cerberus would be eligible for a $10 million break-up fee and reimbursement of up to $4 million in expenses.

Tower said in its motion that the term sheet reflects a significant increase in value compared to the equity proposal that was terminated in January and paves the way for the company to confirm a plan of reorganization before the Aug. 2 DIP expiration date.

Tower, a 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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