Dura Automotive Systems on Monday reportedly said it would not make a $US17.25m bond interest payment due today and expects to undertake a debt restructuring in the “near term”, as tough auto industry conditions take their toll on parts suppliers.
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Dura, of Rochester Hills, Michigan, has 30 days to resolve the technical default on its bond payment, but many analysts expect Dura to file for Chapter 11 bankruptcy protection instead, Dow Jones reported.
Dura, like many of its competitors, is dealing with production cuts by US auto makers, high raw material prices and high debt. Over the past two years, a handful of other suppliers – most notably Delphi and Dana – have sought bankruptcy protection.
If a default is determined at Dura, BNY Midwest Trust Company, the trustee under the indenture, or the holders of at least 25% of the outstanding notes, would be entitled to declare all of the notes due and payable immediately, the report said.
The company also said that failure to make the interest payment on the notes will constitute an immediate event of default under its asset-based revolving credit facility. Currently $400m in notes are outstanding.
In its Monday filing with the Securities and Exchange Commission, the company reportedly said it “expects that the deterioration of industry conditions will require it to undertake a debt restructuring in the near term.”
According to Dow Jones, Dura said in the filing that raw material prices remain at or near record levels.
The news agency noted that speculation has swirled around Dura since it swung to a second-quarter net loss of $131.3m, or $6.96 a share. Its stock has lost much of its value and has traded under $1 since 27 July.
Dow Jones noted that the company launched a restructuring plan, dubbed “50 Cubed,” in February. The cost-cutting plan involved the closure of five to 10 plants worldwide and moving more production to countries with lower labour costs.
In July, as Dura reported its second-quarter loss, chief executive officer Larry Denton said the company would step up the plan and cut 510 non-manufacturing jobs by year’s end, the news agency added, noting that, since then, Ford, Chrysler Group and General Motors have announced wider production cuts.
Dura also has been selling assets, recently receiving $32.6m in cash for its Dura Automotive Systems Kohler operation in Germany, Dow Jones said.
