3rd UPDATE: Dura Auto Latest Supplier To File Chapter 11
![]() (Updates with analyst comment in graphs 7-9, bond prices and ratings change in graphs 16-18.) By Of DOW JONES NEWSWIRES The Rochester Hills, Mich., company joins more than a half-dozen major suppliers - most notably Only Dura's U.S. and Canadian subsidiaries filed for Chapter 11, while the company's other foreign operations - which account for about 51% of its revenue - were not part of the filing. Dura listed assets of about The company's financial woes have been caused by a combination of production cuts from U.S. auto makers, high raw material prices and a high debt load. Production cuts from Chrysler cut production by 25% in the third quarter, GM said it will cut fourth-quarter North American production by 12%, and Ford plans a 21% cut in fourth-quarter production. Additionally, Ford confirmed Monday that it plans to further cut production by 8% to 12% in the first half of 2007. "It's extremely expensive, these on-again, off-again production schedules, and it just kills the income statement for these suppliers," Gillette said. "In North America over the next several months, we're going to see a lot of fixed assets standing still, and when you're margins are quite thin, that can be disastrous for a supplier." Gillette said he predicts more Chapter 11 supplier filings in the next couple of years. CMS Worldwide is a research and consulting firm based in Farmington Hills, Mich. But it was Dura's highly leveraged financial situation, and its failure to pay interest on its debt, that prompted its bankruptcy filing, Dura Chief Financial Officer "The company is not able to generate sufficient cash flow from operations to service its indebtedness and to meet other obligations," Marchiando said. Dura owes its bondholders about Filing Was Anticipated Dura said a lending group led by Goldman Sachs Capital Partners, General Electric Capital Corp. and Barclays Capital have agreed to provide the company with Speculation had swirled regarding a possible Dura Chapter 11 filing since the company swung to a second-quarter net loss of Dura's stock has lost much of its value and has traded under Dura bonds, meanwhile, fell after Monday's filing. The company's 8.625% notes due 2012 were recently down 2.5 points, or cents on the dollar, trading at 30.65 points, according to online corporate bond trading platform MarketAxess. Dura's 9% notes due "It was definitely expected," said a trader of the Chapter 11 filing. "It was priced into the bonds." Ratings firm Standard & Poor's dropped Dura ratings on Monday deeper into junk territory, lowering its senior unsecured and subordinated debt ratings to D from CC, its lowest possible rating, signifying default. The corporate-credit rating and rating on Dura's Dura launched a restructuring plan, dubbed "50 Cubed," in February. The cost- cutting plan involved the closure of five to 10 plants worldwide and moving more production to countries with lower labor costs. In July, as Dura reported the second-quarter loss, the company said it would step up the plan and cut 510 non-manufacturing jobs by year's end. Dura's two largest shareholders are Dimensional Fund Advisors, which owns an 8.54% stake, and Barclays Global Investors N.A., which owns an 8.67% stake. Auto suppliers have drawn more interest lately from private equity firms and hedge funds, a possible indication there's confidence the struggling sector can be turned around. Several firms and hedge funds are vying for control of Delphi, and Among Dura's first-day requests in its bankruptcy case, the company wants court approval to pay its employees and its critical vendors. It also wants permission to tap Dura employs more than 7,100 people in the U.S. and Law firm Kirkland & Ellis will handle Dura's bankruptcy case. The case number is 06-11202. A judge has yet to be assigned the case. - ( ![]() |
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