US: Dura files for bankruptcy protection
Dura Automotive Systems, which two weeks ago missed a bond interest payment prompting analysts to speculate it would file for Chapter 11 bankruptcy protection, on Monday did just that.
In a statement, the parts maker said the company and its US and Canadian subsidiaries have filed for Chapter 11 protection with the US Bankruptcy Court for the District of Delaware.
However, European and other operations outside of the US and Canada, accounting for approximately 51% of revenue, are not part of the filing.
"Dura's decision to pursue a reorganization under Chapter 11 came after evaluating all options to restructure its balance sheet to reduce the company's indebtedness and interest expense," the statement said.
As part of the filing, Dura has arranged for approximately $300 million in debtor-in-possession (DIP) financing from Goldman Sachs, GE Capital and Barclays, which will be used to fund normal business operations and continue its operational restructuring program initiated in February 2006.
The company has requested, and expects to receive, permission from the court to pay employee salaries, wages and benefits. It has also asked for authority to pay certain critical pre-petition vendor claims and will continue to pay its post-petition obligations as usual to help ensure continuity of supply to customers.
"With industry conditions tightening further, we concluded that our capital structure is no longer appropriate," said chairman and chief executive officer Larry Denton. "The Chapter 11 process will enable us to work with our creditors on a plan that will reduce our debt burden and align the business to meet the challenges of tomorrow's automotive marketplace."
Dura said the accelerating deterioration of the North American automotive industry, in particular, further production cuts by the major US OEMs and the escalating cost of raw materials, adversely affected its cash position prior to the filing. The DIP financing will improve Dura's liquidity, providing the company with sufficient working capital to continue normal operations and fund its turnaround.