WASHINGTON (Dow Jones/AP) - Dana Corp. is asking a bankruptcy judge for permission to spend about $7.44 million to repurchase two manufacturing plants it currently leases from a wholly owned subsidiary that isn't in bankruptcy proceedings.
The auto-parts company has been leasing plants in Stockton, Calif., and Danville, Ky., from its Dana Credit Corp. unit, but said in a court filing Tuesday that it will reap accounting benefits if it buys the facilities.
Currently, the company pays Dana Credit Corp. (DCC) a monthly rent of $45,014 for the Danville plant and $130,550 for the Stockton plant.
Dana decided in October 2001 to wind down DCC's business, and last November won permission from the U.S. Bankruptcy Court in Manhattan of a settlement governing its payment of rent to DCC.
Because DCC is in the process of winding down its operations, Dana said that it would at some point need to repurchase the two facilities. Repurchasing the units will, the company said, eliminate rental expense from its financial books, resulting in a show of increased income.
The company would pay about $1.33 million for the Danville facility and $6.11 million for the Stockton facility.
Closing the deal quickly will not only accelerate the accounting benefits, but also allow the facilities to be used as collateral for any exit financing, according to the filing.
Dana told the court that it wants to close the purchases as soon as possible so that it can obtain the accounting benefits. The company is also hoping to avoid having to make the next round of lease payments, due June 1.
The court will consider authorizing the purchases at a May 23 hearing.
Dana, of Toledo, Ohio, filed for Chapter 11 protection from creditors on March 3, 2006. The company is one of a growing number of auto-parts companies forced into major restructurings because of the slumping U.S. auto industry.