Auto Supplier Newsletter

AUTO SUPPLIER NEWSLETTER
November 2006 issue
Automotive bankruptcies are becoming a frequent occurrence in the
business world today. A broken link in the auto supply chain could have
lasting effects on other companies in the chain. That’s why Barnes &
Thornburg LLP’s Creditors’ Rights Department publishes and distributes
a monthly summary of the history and current status of important bankruptcy cases in the automotive industry. This month, we have added the
Dura Automotive Systems case, which was filed in the Bankruptcy Court
for the District of Delaware on October 30th.
We at Barnes & Thornburg hope that you find this newsletter informative and helpful. If you have any comments on published articles or
suggestions for future pieces, please contact any one of us at our offices
listed to the right. If you have colleagues you wish to receive this newsletter, please send their e-mail addresses to [email protected].
Materials on Insolvent Automotive Supplier
Cases Now Available
The Creditors’ Rights
Department of Barnes
& Thornburg
LLP has
prepared
materials for
sellers of goods
to and buyers
of goods from
insolvent auto suppliers -- both before
these suppliers become
subjects of bankruptcy
cases and after they file
bankruptcy petitions. These
materials have been published by the American
Bankruptcy Institute.
Further information
about the publication
is available at
www.abiworld.org.
for additional information,
please contact:
Chicago, illinois:
Deborah thorne
Kevin Driscoll
12-5-11
Grand rapids, michigan:
patrick mears
John Gregg
616-42-0
indianapolis, indiana:
alan mills
mike mcCrory
Wendy Brewer
mark r. Owens
1-26-11
Washington, D.C.:
richard streeter
202-28-11
south Bend, indiana:
mike Watkins
54-2-111
fort Wayne, indiana:
steve fink
260-42-440
elkhart, indiana:
Geoff Church
54-2-0681
This Barnes & Thornburg LLP publication should not be construed as legal advice or legal opinion on any specific
facts or circumstances. The contents are intended for general informational purposes only, and you are urged to
consult your own lawyer on any specific legal questions you may have concerning your situation.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Dura Automotive Systems, Inc.,
Case No. 06-11202 (Bankr. D. Del.)
Background:
On October 30, 2006, Dura Automotive Systems,
Inc. and 42 of its affiliates (collectively, “Dura”) filed
voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. The
bankruptcy judge presiding over the jointly administered cases is the Honorable Kevin J. Carey. The
date for the Meeting of Creditors has yet to be determined. A hearing has been set for November 20,
2006 to consider the entry of final orders on many
of the First Day Interim Orders. The Court has set
Omnibus Hearing Dates including December 21,
2006, January 23, 2007, February 21, 2007 and March
21, 2007.
Official Committee of Unsecured Creditors
Appointed
An Official Committee of Unsecured Creditors
was appointed on November 8, 2006. The members
of the Committee include the following: Wilfrid
Aubrey LLC, BNY Trust Company Midwest, US
Bank National Association, International Union,
UAW, Pension Benefit Guaranty Corporation,
Johnson Electric N.A., Inc. and Thompson I.G., LLC.
First Day Orders Entered
First day motions were heard on October 31,
2006. Among the orders that were entered was an
Interim Order Authorizing the Debtors to Obtain
Postpetition Financing and Granting Liens and
Superpriority Claims to Certain Postpetition Lenders.
Counsel for Dura stated that Dura owes approximately $400 million to its first and second lien secured
lenders. It is obligated on senior unsecured notes of
approximately $400 million, subordinated unsecured
notes of approximately $520 million, $50 million
in toppers securities and $1.3 billion of long term
debt. All parties that have objections to the entry of
the Interim Order or to the enter of a final order are
required to file an objection on or before November
13, 2006. If objections are filed, a hearing will be
held on November 20, 2006.
The Court also entered an Order on October 31,
2006 authorizing payment of certain critical vendors (“Critical Vendors”) and the payment of 20 day
administrative claims (“Priority Vendor Claims”).
The Court authorized the Debtor to pay prepetition
claims owed to Critical Vendors in amount of $9.25
million during the interim period. The Debtors will
be allowed to determine who qualifies as a Critical
Vendor. In addition, the Debtors were authorized
to pay claims of creditors entitled to administrative
priority under section 503(b)(9) of the Bankruptcy
Code. The aggregate amount which can be paid during the interim period may not exceed $9.25 million.
The Debtors are to attempt to cause each Critical
Vendor and Priority Vendor to enter into a Trade
Agreement that provides for (i) an estimated prepetition trade claim amount; (ii) that the Critical/Priority
Vendor be bound by the terms which were most
favorable to the Debtors and in effect between the
Critical /Priority Vendor and the Debtors during the
120 days prior to the commencement of the Dura
Chapter 11 case; (ii) that the Critical/Priority Vendor
agree to continue to sell on these terms (iv) that the
Critical/Priority Vendor agree not to file or assert
any liens against Dura or remove the liens if one was
placed prepetition; (v) that the Critical/Priority Vendor
agree not to assert a reclamation claim; and (vi) that
if the Critical/Priority Vendor’s participation in the
program terminates or fails to continue to sell to the
Debtor, any payments received by the Critical/Priority
Vendor will be deemed to have been in payment of
then outstanding postpetition obligations owed to
the Critical/Priority Vendor and if there is an excess
must be repaid to the Debtor. The Debtor testified during the first day hearing that Critical Vendors
have been selected on the basis of whether they were
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Dura Corp., continued
sole source, whether they could be easily replaced,
whether they were subject to the “pea-pack” process
or similar processes and as to whether they had outstanding accounts payable either within the 20-day
timeframe or outside the 20-day time frame. Critical
Vendors are generally those with payables outside the
20-day time frame.
Other First Day Orders were entered including
those providing adequate protection to utilities.
Bar Date
The bar date for filing proofs of claim in these
cases has not been set.
In re Delphi Corp.,
Case No. 05-44481 (Bankr. S.D.N.Y.)
Background:
On October 8, 2005, Delphi Corporation and
several of its affiliates (collectively, “Delphi”) filed
voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New
York.1 The bankruptcy judge presiding over the
jointly administered cases is the Honorable Robert
D. Drain.2 Shortly after the petition date, the Official
Committee of Unsecured Creditors was appointed by
the United States Trustee. The Creditors Committee
has retained counsel to represent it in these cases. No
proposed disclosure statement or Chapter 11 plan of
reorganization or liquidation has yet been filed in the
case.
On March 31, 2006, Delphi filed a motion to (i)
reject its collective bargaining agreements with its
labor unions, including the UAW, and (ii) modify
retiree health benefits. Delphi has, to date, been
unsuccessful in its negotiations with its labor union,
as well as General Motors Corporation, to reach a
consensual resolution to the proposed rejection of the
collective bargaining agreements and modification
of retiree health benefits. A hearing on the motion
has been adjourned indefinitely. The Bankruptcy
Court has entered an order extending the date by
which a ruling on the motion must be entered until
November 30, 2006, subject to further extension by
the Bankruptcy Court. Members of the United Auto
Workers union have already voted to authorize a
strike against Delphi, if necessary.
In the motion to reject the collective bargaining
agreement and modify retiree health benefits, Delphi
has disclosed that as part of its restructuring efforts, it
intends to close or sell 21 of its 29 U.S-based manufacturing plants and cut approximately 80 percent of
its U.S. hourly work force. Delphi also previously
disclosed that it intends to reduce its supplier base
from approximately 6,000 suppliers to only approximately 750 suppliers.
Delphi has filed a motion to reject over 5,000
unprofitable supply contracts with General Motors,
for which a hearing has been adjourned indefinitely.
The Creditors Committee has filed a statement with
the Bankruptcy Court that supports Delphi’s motion to
reject the unprofitable contracts. The hearing on this
motion has been adjourned to a date to be determined
sometime by the Bankruptcy Court in the
On May 12, 2006, the Bankruptcy Court entered
an order approving an hourly attrition agreement
between Delphi, the UAW and General Motors.
1 It should be noted that, to date, Delphi’s foreign affiliates have not filed bankruptcy petitions or the equivalent thereof under section 304 of the Bankruptcy Code (which was replaced by Chapter 15 of the Bankruptcy Abuse and Consumer Protection Act of 2005),
nor have they sought similar relief in foreign jurisdictions.
2 On the petition date, the Bankruptcy Court entered an order for the joint administration of these cases under case number 0544481.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Delphi Corp., continued
Under the plan, General Motors has agreed to assume
the financial obligations related to the lump sum payments to be made to Delphi U.S. hourly employees
who have accepted normal or voluntary retirement
incentives and certain post-retirement employee benefit obligations related to Delphi employees. On June
9, 2006, Delphi announced a supplemental agreement
with the UAW expanding existing retirement incentives and establishing a buyout program.
On June 29, 2006, the Bankruptcy Court authorized Delphi to enter into a special attrition program
by and among Delphi, the IUE-CWA and General
Motors, which is similar to the agreement Delphi
reached with the UAW and General Motors. Under
the program, some U.S. hourly employees were
offered lump sum payments of $35,000 to retire.
According to various sources, the programs with
the IUE-CWA and the UAW will cost Delphi and
General Motors approximately $135 million each.
Delphi is continuing discussions with the USW and
other unions to offer similar attrition programs for
their members. According to various sources, approximately 20,000 hourly workers have agreed to buyouts or early retirement under the attrition programs.
Delphi has reported that the acceptance rate for the
buyouts and retirement incentives among UAW
employees was 85 percent.
Approximately one year ago, Delphi employed
nearly 34,000 hourly workers in the United States.
It is estimated that by January 1, 2007, Delphi will
employ less than 10,000 workers in the United States
due to the attrition programs.
The period of exclusivity for Delphi to file its
Chapter 11 plan has been extended until February 1,
2007, while Delphi’s exclusive period for soliciting
acceptance of a plan has been extended until April
2, 2007. In a press release from Delphi dated March
31, 2006, Delphi stated that it expects to emerge from
Chapter 11 during the first half of 2007.
On July 28, 2006, the Creditors Committee filed
a motion seeking the authority to prosecute Delphi’s
claims against General Motors. The motion alleges
that Delphi is unlikely to pursue claims against
General Motors for its improper spin-off of Delphi
in order to divest General Motors of burdensome
labor, pension and benefits liabilities. The Creditors
Committee has suggested that Delphi lacks incentive
to pursue these claims because it is currently negotiating various labor-related issues with General Motors,
and, therefore, the Creditors Committee should be
vested with standing to pursue the claims on behalf
of Delphi’s estate. The Official Committee of Equity
Security Holders has estimated the aggregate amount
of such claims to be as high as $26 billion. The
Equity Committee has argued that the constituency of
the Creditors Committee has a limited financial interest, and, therefore, should not be granted the authority
to pursue claims on behalf of Delphi, as requested in
the Creditors Committee’s motion.
Update:
Recent reports have suggested that Ripplewood
Holdings LLC has been in discussions with Delphi
and its unions for the potential purchase of a substantial portion of Delphi’s assets. In addition, Cerberus
Capital Management LP and Appaloosa Management
have expressed interest in purchasing a stake in
Delphi and are both rumored to be in discussions. At
least one news agency has reported that Roger Penske
is interested in purchasing Delphi Steering, subject to
resolution of Delphi’s labor disputes.
The Securities and Exchange Commission has
indicated that it will be filing civil fraud claims
against Delphi’s former chief executive and former
chief financial officer, among others, for alleged
accounting improprieties that resulted in Delphi’s
restatement of earnings for several years prior to its
bankruptcy filing. The former Delphi executives have
requested that Delphi cover legal costs incurred as a
result of responses to federal subpoenas and civil lawsuits. The SEC is also expected to file charges against
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Delphi Corp., continued
officials at other companies who were involved in
alleged improper transactions with Delphi.
Finally, professionals for Delphi and the
Creditors Committee and Equity Holders Committee
recently filed fee applications in the aggregate amount
of approximately $58 million, which brings the total
amount of fees requested in the case to approximately
$97 million.
The bar date for filing proofs of claim in these
cases was July 31, 2006. The next omnibus hearing
date in these cases is scheduled for November 30,
2006.
General unsecured claims against Delphi are
reportedly trading as high as 82 percent in the case.
In re Dana Corp.,
Case No. 06-10354 (Bankr. S.D.N.Y.)
Background:
On March 3, 2006, Dana Corporation and forty
(40) of its U.S. subsidiaries3 voluntarily filed for
protection under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York
(Manhattan). Dana’s European, South American,
Asia-Pacific, Canadian and Mexican subsidiaries as
well as DCC, Dana’s lease financing subsidiary, were
not included in the bankruptcy filing.
The United States Bankruptcy Court Judge that
is presiding over Dana’s bankruptcy cases is The
Honorable Burton R. Lifland. The bankruptcy cases
are being jointly administered under case number
06-10354. The United States Trustee appointed
an Official Committee of Unsecured Creditors, an
Official Committee of Equity Security Holders and
an Official Committee of Non-Union Retirees. As
part of the “first day” orders entered in this case, the
Bankruptcy Court entered an Order approving limited
notice to parties-in-interest that requires that notices
of certain of Dana’s bankruptcy proceedings only be
sent to parties on established service lists. Certain
procedures are in place for parties-in-interest to be
placed on these service lists. Additionally, certain
“hotlines” have been established for both domestic
and international vendors and employees/retirees.
According to Dana, the company intends to use
the bankruptcy process to implement long-term solutions that will position Dana for a stable and profitable future. To accomplish this goal and operate the
company, Dana has obtained and the Bankruptcy
Court has approved debtor-in-possession financing in
the amount of $1.45 billion (consisting of a $750 million revolving credit facility and a $700 million term
loan) from Citigroup, Bank of America, N.A., and JP
Morgan Chase Bank, N.A. This financing is not set
to expire until March 3, 2008. Some of the reasons
given for the filing of the bankruptcy cases are a
decline in revenues, decreasing market share and production levels of Dana’s largest domestic customers,
and increases in commodity and energy prices.
3 The forty (40) related debtors are: Dakota New York Corp.; Brake Systems, Inc.; BWDAC, Inc.; Coupled Products, Inc.; Dana
Atlantic LLC; Dana Automotive Aftermarket, Inc.; Dana Brazil Holdings I LLC; Dana Brazil Holdings LLC; Dana Information Technology LLC; Dana International Finance, Inc.; Dana International Holdings, Inc.; Dana Technology Inc.; Dandorr L.L.C.; Dorr Leasing
Corporation; Echlin-Ponce, Inc.; EFMG LLG; EPE, Inc.; ERS LLC; Flight Operations, Inc.; Friction Inc.; Friction Materials Inc.; Glacier
Vandervell Inc.; Dana Risk Management Services, Inc.; Dana World Trade Corporation; DTF Trucking Inc.; Hose and Tubing Products, Inc.; Lipe Corporation; Long Automotive LLC; Long Cooling LLC; Long USA LLC; Midland Brake, Inc.; Prattville Mfg., Inc.;
Reinz Wisconsin Gasket LLC; Spicer Heavy Axle & Brake, Inc.; Spicer Heavy Axle Holdings, Inc.; Spicer Outdoor Power Equipment
Components LLC; Torque-Traction Integration Technologies, LLC; Torque-Traction Manufacturing Technologies, LLC; Torque-Traction
Technologies, LLC; and United Brake Systems Inc.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Dana Corp., continued
Update:
•
•
Numerous objections were filed to the Debtors’
motion for clarification and reconsideration of
the Bankruptcy Court’s Order denying the executive compensation motion. The October 11, 2006
hearing on this motion was adjourned to October
24, 2006. During the October 24, 2006 hearing
on the motion, the Court allowed the Debtors
an additional 24 hours to file a response to various objections to the motion. Additional time
was required and the Bankruptcy Court granted
the Debtors another day to file a response. The
Debtors requested a third extension and the
Bankruptcy Court granted an extension until
November 6, 2006 to file a response to the
various objections. On November 6, 2006, the
Debtors filed a consolidated response to the various objections. Further, the Bankruptcy Court
extended the objection deadline until November
14, 2006 and the hearing has been adjourned until
November 21, 2006 at 10:00 a.m. (Eastern Time).
On September 20, 2006, the Debtors filed a
motion to bifurcate the Bankruptcy Court’s consideration of certain similar issues concerning
reclamation claims as well as establishing a briefing schedule, discovery guidelines and hearings
with respect to such issues. A number of objections were filed by reclamation claimants to this
motion. On October 10, 2006, the Debtors filed
an omnibus reply to the numerous objections.
The bifurcation motion, numerous objections, and
the Debtors’ omnibus response were heard at the
October 11, 2006 hearing. At this hearing, the
Court approved the motion and entered an Order
on October 13, 2006 separating the Debtors’ prior
lien and fact intensive defenses. The litigation,
including discovery, concerning the fact intensive defenses is stayed and postponed until the
Bankruptcy Court rules on the applicability of
the Debtors’ prior lien defense. A hearing with
respect to the Debtors’ prior lien defense is scheduled for February 28, 2007 at 10:00 a.m. (Eastern
•
•
•
•
•
•
Time). Further, the Court established a schedule
governing discovery as well as a briefing schedule. On October 23, 2006, the Debtors filed their
initial brief in support of the prior lien defense
to reclamation claims. Responses are due by
January 26, 2007 at 4:00 p.m. (Eastern Time).
On October 11, 2006, the Court entered an order
approving the retention of Stahl Cowen Crowley
LLC as counsel to the Official Committee of
Non-Union Retirees.
On October 11, 2006, the Court entered an order
approving the retention of Jefferies & Company,
Inc. as Financial Advisors to the Official
Committee of Equity Security Holders.
On October 12, 2006, the Court entered an
order approving the retention of Development
Specialists, Inc. as Financial Advisors to the
Official Committee of Non-Union Retirees.
On September 11, 2006, the Debtors filed a
Motion to Approve the Process for the Sale of
its Trailer Axles business. On October 19, 2006,
the Bankruptcy Court entered an order approving certain bidding procedures, bidder protections
and scheduling a final hearing for this sale on
December 19, 2006, as well as certain other deadlines.
On October 19, 2006, the Debtors filed a
Stipulation Between the Debtors, Dana Credit
Corporation and its Subsidiaries and Certain
Holders of Notes from Dana Credit Corporation
for an Order Extending the Bar Date to File
Proofs of Claim. Approval of this Stipulation
would result in the extension of the bar date previously extended until October 23, 2006 solely
for Dana Credit Corporation and certain noteholders to December 7, 2006.
On October 23, 2006, the Official Committee
of Non-Union Retirees filed an application
for authority to employ the Segal Company as
Actuarial Consultants to assist the committee in
analyzing certain benefits.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Dana Corp., continued
•
•
On October 25, 2006, the Debtors filed a motion
to establish a process with respect to the filing
of objections to claims and settling claim disputes. By this motion, the Debtors are seeking
the Bankruptcy Court’s permission to object to
numerous claims as part of a single consolidated
omnibus objection. Additionally, the Debtors
propose to object to claims on a three-tier basis:
(i) Tier One - Untimely, Duplicate and Amended
or Superseded Claims, (ii) Tier Two - Basic
Procedural, Classification and Books and Records
Objections, and (iii) Tier Three - Specialized
Substantive Objections. The claims objection
process also establishes guidelines and deadlines
for claim holders to respond to the Debtors’
objection. Lastly, the Debtors are seeking authority to settle claim objections pursuant to certain
criteria. A hearing on this motion was held on
November 8, 2006 and the Bankruptcy Court
ordered the Debtors to present a proposed Order
for the Bankruptcy Court’s consideration on
November 9, 2006 at noon (Eastern Time) with
Counter-Proposed Orders due on November 9,
2006 at 11:30 a.m. (Eastern Time).
On November 6, 2006, the Debtors filed a motion
for an order authorizing the assumption of certain
•
•
•
employment agreements, as modified; approving
a long term incentive plan; and granting related
relief. By this motion, the Debtors are seeking to assume the pre-bankruptcy employment
agreements of its President and CEO as well as
the pre-bankruptcy employment agreements of
three senior executives; the allowance of certain
general unsecured claims; and the approval of
a long-term performance based incentive plan
for its President and CEO as well as five senior
executives. Objections were due by November
14, 2006 at 4:00 p.m. (Eastern Time) and a hearing is scheduled for November 21, 2006 at 10:00
a.m. (Eastern Time).
The next omnibus hearing in the Debtors’
Bankruptcy Cases is scheduled for November 29,
2006 at 10:00 a.m. (Eastern Time) at the United
States Bankruptcy Court for the Southern District
of New York.
As noted in our past newsletters, a number of
claims have been transferred in these bankruptcy
cases. This past month has also seen numerous
claims being transferred.
General Unsecured Claims are reportedly trading
as high as 60 to 70 percent in these cases.
In re Tower Automotive, Inc.,
Case No. 05-10578 (Bankr. S.D.N.Y)
Background:
On February 2, 2005, Tower Automotive and
25 of its related entities (“Tower”) filed voluntary
petitions under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York. The
bankruptcy judge presiding over the jointly administered cases is the Honorable Allan L. Gropper. The
Official Committee of Unsecured Creditors (the
“Committee”) was appointed by the United States
Trustee and has retained counsel to represent it
in these cases. An Official Committee of Retired
Employees has also been appointed.
No proposed disclosure statement or Chapter 11
plan of reorganization or liquidation has yet been filed
in the case. Tower has circulated a draft plan to its
pre-petition secured lenders and the Committee for
their comments. Tower retains the exclusive right to
file a plan of reorganization through November 30,
2006.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Tower Automotive, continued
Update:
COMMITTEE APPEALS UNION SETTLEMENTS
On May 22, 2006, Judge Gropper approved settlements between Tower and its retired Milwaukee
workers which resolved the vast majority of its retiree
obligations. The settlement provided Tower with an
immediate cash benefit, freeing it from paying $20
million in retiree benefits at the end of 2006. As a
part of the settlement, the Milwaukee retirees agreed
to support a plan of reorganization, so long as the plan
complied with the approved settlement. The settlement of this matter and settlements with other union
retirees were not supported by the Committee which
appealed both settlement orders. The appeals are
pending in the Southern District of New York.
The Court entered an Order on September 21,
2006 authorizing the amendment of Tower’s contracts with the United Auto Workers and United
Steelworkers of America. These two unions represent 2,100 of Tower’s 3,000 hourly employees. The
amendments which Tower and the UAW and USW
have agreed to will generate average annual cost
savings of approximately $5.4 million over the next
five years. The settlement provides a global agreement with respect to the Elkton Facility, the Bluffton
Facility, the Milan Facility and the Clinton Facility.
Agreement with the International Union of Electrical
Workers-Communications Workers of America has
not been announced.
SALE OF MILWAUKEE ASSETS
As previously reported, on March 31, 2006,
Tower Products, one of the Tower Debtors ceased all
operations at its Milwaukee facility. All Milwaukee
assets have been sold for approximately $1.175 million.
OBJECTION TO CLAIM OF GOLDMAN SACHS
CREDIT PARTNERS LP
Tower previously objected to the claim filed by
Goldman Sachs on account of certain equipment
leases which were rejected. The claims which are
asserted are in excess of $700 million. The lease payments were guaranteed by other certain of the Tower
debtors. The Court heard arguments from both Tower
and Goldman Sachs on September 12. The Court
found that the motions for summary judgment were
not ripe to be heard and has allowed the parties several months for discovery.
SETTLEMENT WITH GENERAL MOTORS
Tower and General Motors have entered into a
settlement agreement which was approved by the
Bankruptcy Court. The terms are confidential and
have been filed under seal.
REJECTION OF EQUIPMENT LEASE WITH
COMERICA LEASING CORPORATION AND ENTRY
INTO NEW LEASE AGREEMENT
Tower and Comerica have entered into an order
allowing Tower to reject its lease with Comerica. The
order allows Comerica a rejection claim of $837,216
as a general unsecured claim. Simultaneously, Tower
and Comerica executed a new lease agreement which
expires on December 31, 2010.
BAR DATE
The Bankruptcy Court previously entered an
order setting May 31, 2005 as the bar date for all
non-governmental claims. Since the running of the
bar date, Tower has reviewed claims and filed numerous objections to determine the exact amount of the
claims which have been filed and has obtained orders
from the Bankruptcy Court expunging certain claims
and reducing the amount of other claims. Tower and
certain of its creditors are also negotiating orders
authorizing certain creditors to recoup or setoff
allowed pre-petition claims against amounts owed by
certain creditors to Tower.
Currently Tower unsecured claims are trading for
approximately $0.20.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. In re Collins & Aikman, Inc.,
Case No. 05-55927 (Bankr. E.D. Mich.)
Background:
On May 17, 2005, Collins & Aikman, Inc. and
several of its affiliates (collectively, “Collins &
Aikman”) filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Eastern
District of Michigan. The bankruptcy judge presiding
over the jointly administered cases is the Honorable
Steven W. Rhodes.4 Shortly after the petition date,
the Official Committee of Unsecured Creditors was
appointed by the United States Trustee. The Creditors
Committee has retained counsel to represent it in
these cases.
The Creditors Committee has filed a motion
for the entry of an order allowing the Creditors
Committee to conduct an examination of Collins &
Aikman’s largest customers, Ford Motor Company,
General Motors Corporation, and DaimlerChrysler
AG. According to the Creditors Committee, Ford,
General Motors and DaimlerChrysler “unlawfully
coordinated” their behavior both prior and subsequent
to Collins & Aikman’s bankruptcy. The Creditors
Committee is seeking information related to the terms
and conditions of contracts with Ford, General Motors
and DaimlerChrysler, especially whether Collins
& Aikman received reasonably equivalent value in
exchange for the contracts.
In a separate filing, the Creditors Committee has
requested approval to investigate the actions of Ford,
General Electric Capital Corporation and General
Electric Capital De Mexico in relation to GE Capital
De Mexico’s efforts to foreclose on the assets of
Collins & Aikman Automotive Hermosillo, a nondebtor affiliate of Collins & Aikman. The Hermosillo
facility is Collins & Aikman’s largest revenue producing plan, with approximately $300 million in
revenue each year. The proposed investigation would
focus on whether Ford encouraged GECC to initiate foreclosure proceedings as a result of the default
that occurred under credit facilities when Collins &
Aikman filed for bankruptcy. The hearing on this
motion was scheduled for November 16, 2006.
The Creditors Committee has filed a motion to
commence avoidance actions, which was rescheduled
for hearing on November 16, 2006.
General Motors has filed a motion for relief from
the automatic stay to obtain possession of tooling, and
a motion for relief from the stay to effectuate setoff,
which has yet to be scheduled for hearing.
Update:
Collins & Aikman announced on November 14
that it has shifted its focus to selling itself in whole or
in parts rather than emerging from court protection as
a standalone company.
In mid-October, Collins & Aikman ceased shipments to Ford’s plant in Hermosillo, Mexico as a
result of a pricing dispute, which forced a shut down
of assembly lines that manufacture the Ford Fusion,
Mercury Milan and Lincoln MKZ. Although the
stoppage lasted for only one shift, Ford has stated
that its relationship with Collins & Aikman has been
irreparably harmed.
Collins & Aikman recently announced that it
intends to eliminate 10 percent of its salaried work
force and further evaluate its 45 North American
manufacturing facilities to determine whether consolidation or closure will be appropriate. As a result
of the reductions, Collins & Aikman estimates that it
will save approximately $8 million annually.
Other recent developments include: (i) the entry
of an order authorizing Collins & Aikman to reject
certain executory contracts and unexpired leases;
and (ii) the entry of an order authorizing Collins &
Aikman to provide severance packages to salaried
employees equal to up to four weeks of pay and benefits, plus any accrued vacation.
4 On the petition date, the Bankruptcy Court entered an order for the joint administration of these cases under case number 05-44481.
AUTO SUPPLIER NEWSLETTER
November 2006
pg. 10
In re Collins & Aikman, Inc., continued
The next omnibus hearing in this case is scheduled for November 16, 2006. The deadline for certain
creditors to file proofs of claim was January 11, 2006.
By order of the Bankruptcy Court, the period of
exclusivity for Collins & Aikman to file its Chapter
11 plan has been extended until December 27, 2006,
and the solicitation period has been extended until
February 26, 2007. However, such time periods are
subject to further extension by the Bankruptcy Court.
In re Meridian Automotive Systems, Inc.,
Case No. 05-11168 (Bankr. D. Del.)
Background:
On April 26, 2005, Meridian Automotive Systems,
Inc. and several of its affiliates (collectively,
“Meridian”) filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of
Delaware. The bankruptcy judge presiding over the
jointly administered cases is the Honorable Mary F.
Walrath.5 Shortly after the petition date, the Official
Committee of Unsecured Creditors was appointed by
the United States Trustee. The Creditors Committee
has retained counsel to represent it in these cases.
Update:
Meridian recently filed revisions to the proposed
fourth amended plan and the disclosure statement.
The fourth amended plan proposes $255 million in
exit financing, which includes a $75 million secured
revolving loan, a $150 million term loan and a letter
of credit facility of approximately $30 million. Under
the proposed plan, it is estimated that unsecured creditors will receive zero to two percent of what they are
owed, depending on recovery efforts of the proposed
plan’s litigation trust.
The disclosure statement and voting procedures
were approved on October 25, 2006. Objections
to confirmation of the proposed plan are due on
November 22, 2006, with a confirmation hearing
scheduled for November 29, 2006. Ballots must be
received by Meridian’s claims and voting agent by no
later than 4:00 p.m. (EST) on November 22, 2006.
The Bankruptcy Court has extended the exclusive
period for Meridian to file a plan until December 31,
2006, and the time to solicit acceptances until March
1, 2007.
On October 23, 2006, the Bankruptcy Court
authorized Meridian to continue to employ Jeffrey
J. Stegenga as chief restructuring officer. Although
Stegenga recently joined another restructuring firm,
the order provides that any success fee will be paid to
Stegenga’s previous employer, FTI Consulting.
Other recent developments include (i) the entry of
an order authorizing Meridian to reject certain executory contracts and unexpired leases; (ii) the entry of
an order authorizing Meridian to continue to advance
funds to Meridian’s non-debtor foreign subsidiaries;
(iii) the entry of orders sustaining the third, fourth
and fifth omnibus objections to certain claims; and
(iv) the entry of an order authorizing Meridian to sell
its real property located in Kentwood, Michigan to
Roskam Baking Company.
The next omnibus hearing in this case is scheduled for November 17, 2006. The deadline for certain
creditors to file proofs of claim was December 1,
2005.
5 On April 27, 2005, the Bankruptcy Court entered an order for the joint administration of these cases under case number 05-11168.