Even bankruptcy refinancings are becoming casualties of the global credit crunch.
Dura Automotive Systems has postponed its exit financing process and asked the bankruptcy court to delay its confirmation hearing until early next year because of the tight credit markets. The company, which filed for Chapter 11 in October 2006, had planned to emerge from bankruptcy at the end of this year.
“The credit markets have continued to move against us these past few weeks and the financing terms available in this market are not acceptable to the company,” said chairman and CEO Larry Denton. “While the delay in exiting bankruptcy is regrettable, we are intent on achieving the most favorable financing terms possible so that Dura emerges from Chapter 11 with a significantly strengthened balance sheet.”
Dura’s reorganization plan depends on receiving $425 million in new debt. If it can’t secure that financing, its plan to raise up to $160 million in equity financing through a rights offering backstopped by private-equity firm Pacificor LLC could be in jeopardy, the Associated Press noted.
Dura’s debt plunged to 19 cents on the dollar on the news. The same debt traded as high as 60 cents before the credit crunch sent it spinning downward in July, according to the AP report.
Curiously, equity investors Thursday bid up the price of Dura’s stock by 33 percent, to four cents, on the news.