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December 15, 2020 – The Court hearing the Dura Automotive Systems cases approved the conversion of the Debtors’ Chapter 11 cases to Chapter 7 [Docket No. 1276].
On October 17, 2019, Dura Automotive Systems, LLC and six affiliated Debtors (“Dura” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Middle District of Tennessee, lead case number 19-06741. At filing, the Debtors noted estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. In a subsequently filed Schedule A/B, the lead Debtor noted $0 assets and $106.1mn of liabilities [Docket No. 420].
The Debtors agreed to seek conversion of the cases to Chapter 7 as part of a comprehensive settlement related to their sale transactions.
The conversion motion [Docket No. 1090] states, “Since the commencement of these chapter 11 cases, the Debtors have worked tirelessly to market their assets and effectuate a value-maximizing sale of substantially all of their assets. These efforts culminated in two value-maximizing sale transactions that were approved by the Court at a hearing on May 12, 2020, and orders approving these sales were entered by the Court on May 15, 2020 [Docket Nos. 1028, 1029] (together, the ‘Sale Orders’).
In order to resolve the outstanding concerns raised by certain stakeholders in connection with the Sale Transactions, the Debtors engaged in negotiations with various stakeholders, including the Committee, the U.S. Trustee, the DIP Lender, the Zohar Debtors and the Purchasers (the ‘Parties’). As part of a comprehensive settlement among the Parties that is memorialized in the Sale Orders, the Purchasers, who had originally bargained to purchase all claims and causes of action held by the Debtors, agreed that the Debtors’ estates will retain certain claims and causes of action (defined in the Sale Orders as the ‘Excluded Actions’). The Parties agreed that once the Conversion Conditions have been satisfied, the Debtors would promptly convert these chapter 11 cases to cases under chapter 7, and that the chapter 7 trustee that will be appointed upon conversion may then pursue all of the Estate Actions (as defined in the Sale Orders) for the benefit of the estates and the Debtors’ creditors.
While the Debtors explored alternative options to bring these chapter 11 cases to a conclusion, the chapter 7 conversion contemplated by this motion was a key component of the comprehensive settlement concerning the Sale Transactions. Additionally, the Debtors and their major stakeholders believe that the chapter 7 conversion contemplated herein is the most expeditious and cost-effective mechanism to wind down the Debtors’ affairs and these chapter 11 cases. In reaching this conclusion, the Debtors determined that a conversion to chapter 7 would provide the best outcome for creditors (as opposed to a chapter 11 liquidating plan) because, following the closing of the Sale Transactions, the Debtors’ only remaining assets will be the Estate Actions (and related books and records), which have not been monetized. The Debtors also face the stark reality of administrative insolvency. As a result, the Debtors do not believe that a chapter 11 plan is feasible or in creditors’ best interests.”
As previously reported, on May 15, 2020, further to a November 19, 2019 bidding procedures order [Docket No. 339] and a May 15th sale hearing, the Court hearing the Dura Automotive Systems, LLC cases approved the $50.0mn sale of certain assets in Europe, Brazil and India to DE Buyer, LLC (the “European Transaction”) and the $5.0mn sale of certain assets comprising the Debtors’ North American operations to DNA Buyer, LLC (the “North American Transaction”) [Docket Nos. 1028 and 1029].
The purchasers are both entities created by prepetition and debtor-in-possession (“DIP”) lender Bardin Hill Investment Partners LP and The Charlton Group, Inc. to effectuate the acquisitions, each of which are memorialized in stock and asset purchase agreements attached to the relevant sale order.
DE Buyer agreed to credit bid $50.0mn of $87.0mn extended to the Debtors in the form of DIP financing in the European transaction, and DNA Buyer credit bid $5.0mn of that DIP financing amount under the North American transaction.
In a press release announcing the filing, the Debtors advised that: “… it is moving forward with a restructuring process to facilitate an infusion of new capital and to pursue an expedited going-concern sale process that will fuel the future growth of the Company. To implement this restructuring, the Company and its domestic subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Tennessee. DURA’s non-U.S. subsidiaries are not part of the Chapter 11 filing.
The Company expects this expedited sales process, including the closing on the 363 sale, to be completed within approximately 120 days. A Transaction Committee consisting of two independent directors has been appointed to provide for a clear and quick sales process.”
Lynn Tilton, CEO of DURA, added: “Ongoing constituent disputes have made it impossible for DURA to access ordinary course, yet essential financing. The actions announced today will allow the Company to move forward and access the necessary capital that will fuel its growth. I look forward to working closely with DURA’s leadership and its talented and dedicated work force throughout this process as we continue the transformation of this great company.”
About the Debtors
DURA Automotive Systems is a leading global automotive supplier specializing in the design, engineering, and manufacturing of innovative solutions that drive the evolution of mobility. Founded in 1914, the company invests in five pillars of technological advancement including vehicle lightweighting, design aesthetics, amalgamated mechatronics, advanced safety & advanced mobility, and the fusion of HMI’s with infotainment. DURA employs more than 9,400 people in 14 countries. The company markets complete systems and modules to leading automakers in the Americas, Asia and Europe. Information about DURA and its products is available at www.duraauto.com.
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