The high perceived value of Dana Corp.'s assets has boosted the recovery value on the auto suppliers' bonds. The recovery rate was determined during an auction March 31, to cash settle credit default swap contracts related to the credit. The auction process, held as part of the International Swaps and Derivatives Association's 2006 Dana CDS index protocol, set a 75% recovery value on the bonds. The recovery rate is higher than that of other auto suppliers, such as Delphi Corp., which had a recovery rate of 63.375%.
Analysts said distressed debt investors that piled into the debt after Dana filed for bankruptcy March 3 pushed up the recovery value. "The recovery value on Dana's bonds was high because that is where is the bonds were trading," said Andrew Scott, analyst in the structured products division at JPMorgan. "Post-default, the bonds steadily moved up as distressed investors, seeing value in the company, bought the bonds." Scott added that there was also technical buying on Dana's bonds as investors that bought CDS protection collected bonds to deliver into single-name contracts. But he said that the technical buying was much smaller than that seen after Delphi filed for bankruptcy.
Shelly Lombard, an analyst at Gimme Credit, estimated in a report that Dana has $2.2 billion to pay unsecured creditors. The company has $1.1 billion in secured debt, $1.6 billion of bonds, $358 million of pension liabilities and $400 million of other payables, according to Lombard.