Dura Automotive Wants To Remain Private

Michigan-based car parts maker wants to emerge from Chapter 11 without being subjected to Securities and Exchange Commission rules.

PHILADELPHIA (Dow Jones/AP) — Pacificor LLC, the hedge fund manager in line to become majority shareholder of Dura Automotive Systems Inc., is worried that the company could be forced to issue public financial statements once it's out of bankruptcy.
Dura filed an emergency motion in court late Wednesday in a bid to head off that possibility and ensure that its emergence from Chapter 11 won't be subject to Securities and Exchange Commission rules. The provisions would include an obligation that the auto-parts supplier disclose information about its finances.
Dura is a Rochester Hills, Mich.-based car parts maker.
Pacificor, of Santa Barbara, Calif., hasn't explained why it wants Dura to be a private company when it exits Chapter 11. However, private-equity investors typically prefer to take positions in companies that are outside the purview of securities regulators.
Dura's plan to get out of bankruptcy depends on raising at least $140 million through the sale of new shares to holders of its senior notes. Pacificor has signed on to ''backstop'' the deal, buying any shares that go unsold.
As a substantial holder of senior notes, Pacificor will get a share of the 57.4 percent to 60.7 percent of the reorganized company allotted to that class of debt under Dura's Chapter 11 restructuring plan.
Pacificor also will be entitled to buy a piece of the remaining equity — 39.3 percent to 42.6 percent of the reorganized Dura that will be sold in the offering. Taken together, Pacificor's holdings are likely to make it the controlling shareholder of the reorganized company, attorneys have said in court.
In documents filed in the U.S. Bankruptcy Court in Wilmington, Del., Dura said Pacificor could pull out of the backstop commitment unless the stock sale is tailored to make sure the reorganized Dura will be a private company.
Chiefly, that means cutting the number of people entitled to participate by eliminating smaller holders of the only class of debt entitled to take part in the stock sale, the senior notes.
Companies are generally exempt from SEC rules if they have fewer than 300 shareholders.
Senior note holders who own less than $75,000 of the face amount of the debt would get cash — but no stock in the reorganized company and no chance to take part in the equity offering, if the change Dura is proposing receives court approval.
Additionally, Dura wants the flexibility to cash out larger holders of the senior debt who agree to take the money instead of shares.
The company filed for Chapter 11 protection last year, one of many struggling suppliers to vehicle manufacturers.
Stock that was trading above $4 a share two years ago in the public markets now sees only sporadic buying and selling at about a nickel a share, a sign that current shareholders have gotten the message that there's nothing for them in Dura's Chapter 11 plan.
Holders of about $600 million worth of debt also will be left with nothing under the plan. Some have appealed the bankruptcy court order approving Dura's backstop agreement with Pacificor, on the grounds the court should have subjected the deal to more intense scrutiny.
The company this week pushed back to Wednesday a hearing on the disclosure statement, an outline of its Chapter 11 plan for creditors entitled to vote. The emergency change in the Pacificor agreement is also slated for court review Wednesday.
Dura has said that if Pacificor doesn't get the assurance it seeks that the revamped company won't be subject to SEC rules, another investor willing to backstop the stock sale will have to be found. The company said it can't afford to remain in bankruptcy much longer. Its bankruptcy loan expires Dec. 31, ''and replacing it would be highly expensive and very difficult in the current credit markets,'' attorneys said in court documents.
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