A federal judge yesterday cleared the way for creditors to begin voting on Dana Corp.'s reorganization plan, setting the stage for the Toledo firm to emerge from Chapter 11 by year's end.
Explanatory material that will be mailed with ballots in about a week provides sufficient information for creditors to cast their votes, Judge Burton Lifland ruled during a hearing in U.S. Bankruptcy Court in New York City.
Judge Lifland set Dec. 10 as the date for a confirmation hearing on the firm's proposed bankruptcy-exit proposal.
If the judge signs off after the hearing, metro Toledo's largest corporation hopes to emerge from bankruptcy protection before Dec. 31, a spokesman said.
"The disclosure statement, as modified, does indeed pass muster," Judge Lifland said in approving the explanatory material.
Dana attorney Corinne Ball of the law firm Jones Day said the company plans to send ballots to creditors on Nov. 3 and set a voting deadline of Nov. 28.
The $8.3 billion-a-year manufacturer of axles and truck parts sought protection from creditors in March, 2006, amid an auto industry slump, mounting losses, and cash-flow problems. Dana employs 45,000 people worldwide, including about 1,800 in northwest Ohio.
The plan will pay unsecured creditors 72 to 86 cents for each $1 they are owed, which totals $3 billion. Most payments will be in 100 million newly issued shares of the company. Existing stock will be canceled.
Dana management will receive from 5 percent to 10 percent of the new stock. The existing stock, trading on an over-the-counter market, closed yesterday at 22 cents a share.
The firm headquartered on Dorr Street will finance the plan with proceeds from a $1.3 billion bank loan and sale of $790 million in preferred stock.
Investment firm Centerbridge Capital Partners has agreed to buy $250 million of the preferred shares along with another $250 million in the special stock if no other qualified investor steps forward.
Additionally, a group of Dana bond-holders has issued a guarantee - known as a backstop - for purchase of $290 million more in preferred shares. Judge Lifland yesterday authorized payment of $12 million to the bond-holders for agreeing to the guarantee.
Most of the proceeds from the stock sale will be used to set up a $764 million fund, known as a voluntary employee benefit association, that will take responsibility for providing health care for current and future retirees from Dana's unionized work force.
Dana said it needed to shed the liability, estimated at $1 billion, to be profitable after emerging from Chapter 11.
Information from Bloomberg News Service was used in this report.
Contact Gary Pakulski at:
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