Bankruptcy

Dana Corp. Exits Bankruptcy, Taps Devine

The auto-parts maker names the former finance chief of GM as acting CEO.
Stephen TaubFebruary 1, 2008

Dana Corp. has emerged from Chapter 11 and named John Devine, former CFO and vice chairman of General Motors, executive chairman and acting chief executive officer. Before his stint at GM, where he served from 2001 to mid-2006, Devine spent 32 years at Ford Motor, where he last served as executive vice president and CFO.

Dana joined Calpine Corp. as the second major company to leave bankruptcy, on Friday. While both picked a difficult economic time to exit, Dana, an auto-parts company, might be facing greater risk than Calpine, a power supplier. Cyclical industries, like those attached to car making, typically are more vulnerable to economic downturns than noncyclicals.

Dana, which entered Chapter 11 protection on March 3, 2006, boasted that during its reorganization it achieved $440 million to $475 million in annual cost savings and revenue improvements. Part of the cost savings stemmed from the creation of Voluntary Employee Benefit Association, or VEBA, trusts to assume ongoing obligations for retiree health and welfare costs, according to Dana.

The company obtained $2 billion in exit financing from a group led by Citigroup Global Markets, Lehman Brothers, and Barclays Capital. The financing consists of a $650 million asset-based revolving credit facility and a $1.35 billion term-loan facility. Dana plans to use the debt to repay its debtor-in-possession credit facility, make other payments required upon exit from bankruptcy, and provide liquidity to fund new product programs and for other investments.

Dana’s new common stock began trading Friday on the New York Stock Exchange under the symbol DAN. Its former shares under the symbol DCNAQ have been cancelled and will no longer trade.

Under the reorganization plan, a group of investors led by Centerbridge Capital Partners will make a $790 million equity investment. Centerbridge’s funds will consist of $250 million for preferred stock in the reorganized company and up to $540 million of preferred stock not bought by qualified creditors or an investor group, according to an earlier Reuters report.

Dana’s reorganization has involved the sale of several businesses, renegotiation of labor contracts with its hourly workers, and agreements with its customers.