Committee named to represent interests of Dana shareholders

6/30/2006

An institutional investor and two hedge funds will represent Dana Corp. shareholders when the Toledo auto supplier haggles over its plan to emerge from bankruptcy, a sign the firm s stock may have some value when the Chapter 11 reorganization is completed, experts say.

Brandes Investment Partners LP of San Diego, Appaloosa Management LP of Chatham, N.J., and Harbinger Capital Master Fund I Ltd. of New York were appointed this week by the U.S. trustee to an official committee for equity security holders.

Brandes held shares in Dana before it filed for bankruptcy protection March 3 in U.S. Bankruptcy Court in Manhattan; Appaloosa and Harbinger have bought shares since.

Such a committee gives investors a voice in the reorganization plan, sale of assets, or other moves, and members will have more access to information than shareholders typically do, said attorney Stephen Gross of McDonald Hopkins Co. in Detroit.

It s also good news for shareholders, because it appears they could be compensated with cash or new shares in the company after it emerges from bankruptcy, Mr. Gross said.

Typically, if there s an equity committee formed, it means the equity holders are not out of the money, he said.

Said David Skeel, resident scholar at the American Bankruptcy Institute: I wouldn t recommend that people go out and buy lots and lots of stock, but it is a good sign.

Most Chapter 11 bankruptcy cases do not have equity committees, although the committees have become more common in the last year or so, Mr. Skeel said.

Equity committees are fairly common in large bankruptcy cases Dana listed $7.9 billion in assets and $6.8 billion in debts but having hedge funds such as Appaloosa represented is not, Mr. Gross said.

Equity committees have a fiduciary duty to represent all shareholders, not just their own interests, he said.

Both Appaloosa and Brandes were among investors that asked for the formation of an equity committee, according to court papers.

Brandes and another investor also had requested postponing a hearing on rules for trading in Dana s stock and debt until an equity committee could be formed.

That hearing, set for last week, was postponed until Aug. 9, setting back billionaire Carl Icahn s bid to gain more influence in the reorganization of Dana, in which his American Real Estate Holdings LP holds debt.

Also this week, Dana received bankruptcy court approval in New York for a six-month extension, until Jan. 3, to file its plan to emerge from bankruptcy. Dana had said in court papers it has made progress with the bankruptcy but cannot develop a reorganization plan until completing other tasks, including selling businesses that include factories in Upper Sandusky, Wharton, and Archbold.

In Toledo, meanwhile, U.S. District Court Judge James Carr ruled yesterday that a class-action lawsuit alleging Dana began in 2000 to misstate profits to meet earnings expectations can continue despite the bankruptcy.

Shareholder Roberta Casden had filed the lawsuit against Dana directors, saying they breached their fiduciary duties, a day before the company filed for bankruptcy.

Contact Julie M. McKinnon at: jmckinnon@theblade.com or 419-724-6087.