In a statement, the company said the proposed deal will result in it paying off most of its debts including obligations under a debtor-in-possession (DIP) credit facility and second lien loan facility, assumption of the company’s pensions, and “certain” recovery for unsecured creditors.
“We have accomplished a tremendous amount during the last few years to revitalise Tower so the company can strongly compete in today’s global automotive marketplace,” said president and chief executive officer Kathleen Ligocki in the statement.
During its reorganisation process, Tower diversified its customer base, sold non-core businesses, consolidated North American manufacturing and negotiated settlements with all 10 of its US-based labour unions to gain the profitability needed to attract new investment.
“The recapitalisation of the company is the last major milestone in our restructuring process. We are excited to have the support of an investor like Cerberus Capital Management, a group dedicated to investing in the automotive sector for the long term,” added Ligocki.
The statement said Tower expects to file a Chapter 11 plan by 20 April while suitably qualified parties will be permitted to submit competing bids until 15 June. If competing bids are received, the company will conduct an auction on 21 June to determine the highest and best bid and will then ask the bankruptcy court to confirm its plan, approve a sale on 22 June and close the deal by 31 July.
Bloomberg News noted that Tower is the third supplier to turn to private equity after succumbing to major shifts in the US auto industry. Delphi, also in bankruptcy, is attempting to structure a deal with an investment group led by Cerberus, while Lear is considering a buyout bid from US billionaire investor Carl Icahn, the news agency said.
“The private equity firms have the cash, and the industry is loaded with distressed assets and restructuring situations,” Morningstar analyst John Novak told Bloomberg News.
The report said Tower, based in Novi, Michigan, is one of Ford’s largest suppliers of truck frames [chassis].
According to Bloomberg News, Tower said in a court filing on Wednesday that it had contacted about 20 potential investors and negotiated proposals with Cerberus and three other private equity firms.
Tower reportedly rejected a plan that would have allowed it to emerge from bankruptcy as a stand-alone business, according to the court filing, opting instead for the Cerberus sale because the offer was about $US100m more than the initial bids of other potential investors.
Cerberus will be paid $4m if Tower decides to withdraw from the deal, Bloomberg News added.
The news agency added that Tower was the first of several major US parts makers to file for Chapter 11 reorganisation in the past two years – Collins & Aikman, Dana, Delphi and Dura Automotive also sought bankruptcy protection as they struggled with rising commodity costs and production cuts by Ford and General Motors, which have been losing market share to competitors such as Toyota.