Dana Corp. is increasing the price of its $700 million term loan and making other amendments to its approximately $1.5 billion debtor-in-possession loan, according to a filing with the Securities and Exchange Commission. The bankrupt auto parts supplier has already reduced the size of the revolver by $100 million and is seeking to increase the term loan by $200 million and make changes to covenants regarding EBITDAR levels and borrowings by its European subsidiaries, the filing said.
"DIPS these days are coming in tighter than they used to," said one portfolio manager. "You used to be able to get some value out of playing a DIP." He anticipated the reason Toledo, Ohio-based Dana is increasing the loan pricing by 25 basis points to LIBOR plus 2 1/2% is to appease investors. Kenneth Hiltz, cfo, was out of the office and could not be reached. Calls to a spokesman were not returned.
Dana is looking to reduce certain minimum global EBITDAR covenant levels. It is also looking to increase the amount of cash restructuring charges excluded in the calculation of EBITDAR by $25 million. It will also modify the credit agreement to allow the company to receive and retain $31 million of proceeds from the sale of its trailer axle manufacturing assets to Hendrickson USA. Without the amendment, the sale triggers a mandatory repayment of the $31 million to lenders, according to the filing.
Dana is also looking to restructure its European non-debtor subsidiaries to establish a European credit facility and improve treasury and cash management operations, among other actions.
On Jan. 12, Dana reduced the size of its current $750 million revolver to $650 million and it expects to further decrease it by another $50 million as it divests more non-core businesses, such as its trailer axel assets.
The bankrupt auto parts supplier originally entered into the credit in March 2006 with Citigroup, Bank of America and JPMorgan when it filed for Chapter 11. At the time, the credit was considered one of the larger DIPs on record, consisting of a $750 million revolver, with $400 million available for letters of credit, and a $700 million term loan (CIN, 3/10). The term loan was expected to be priced around LIBOR plus 3 1/4%, but both tranches were eventually priced at LIBOR plus 2 1/4% (3/10). A Citigroup banker and spokeswomen for B of A and JPM declined comment.
Standard & Poor's assigned a BB- rating to the proposed $1.55 billion of DIP facilities, reflecting the company's likelihood of reorganizing and the level of collateral protection afforded by the assets securing the DIP loans. The debt is guaranteed by substantially all of Dana's domestic subsidiaries and as collateral, Dana and each of its guarantor subsidiaries granted a security interest in and lien on effectively all of its assets, including a pledge of 66% of the equity interests of each direct foreign subsidiary, according to an SEC filing.