Dana completes tender offer for 10 1/8% and 9% notes

By Paul Deckelman

New York, Dec. 23 - Dana Corp. said it had completed its tender offer and consent solicitation for its outstanding 10 1/8% notes due 2010 and its dollar- and euro-denominated 9% notes due 2011, which expired as scheduled at 5 p.m. ET on Dec. 22 without extension. As of that deadline, holders had tendered a total of $891 million (or its equivalent) of the three series of notes.

The holders tendered $175.252 million of the $250 million of previously outstanding 10 1/8% notes, leaving $74.748 million still outstanding after the offer. They tendered $459.372 million of the $575 million of 9% dollar-denominated notes, leaving $115.628 million outstanding after the offer. And they tendered €192.723 million of the €200 million of 9% euro-denominated notes, leaving €7.277 million outstanding after the offer. Final settlement of the offer was completed Dec. 23.

Dana said that having previously received the required consents to adopt its proposed amendments to the indenture of each series of notes being tendered for, supplemental indentures containing such amendments have been executed for each note series and had become operative.

As previously announced, Dana, a Toledo, Ohio-based automotive systems maker, said on Nov. 15 that it had begun a cash tender offer for up to $635 million or equivalent of its outstanding 10 1/8% notes and its outstanding dollar- and euro-denominated 9% notes - an amount subsequently raised - and was also soliciting noteholder consents to changes in the notes' respective indentures to eliminate substantially all of the restrictive covenants, certain events of default and related provisions.

Dana initially set an early tender deadline of 5 p.m. ET on Nov. 29, said that consideration to be paid for the notes would be fixed 10 business days before the expiration, and that the offer would expire at 5 p.m. ET on Dec. 22, subject to possible extension. The early tender date for the euro-denominated notes was later extended. It said settlement was expected to be on Dec. 23.

Dana initially said that it would accept notes for purchase according to a priority ranking, with all notes tendered from a higher priority group to be accepted before any notes from a lower group, but subsequently dropped such language from the offer.

Initially, it said that top priority would go to the company's $250 million of outstanding 10 1/8% notes. Consideration for the notes would be determined using formula based on an 85 basis point fixed spread over the reference security, the 1 5/8% U.S. Treasury note due 2006. It said second priority would go to its €200 million of outstanding 9% euro-denominated notes, and third priority to its $575 million of 9% dollar-denominated notes. It initially said that consideration for both would be based on a 110 basis point fixed spread over the 5% U.S. Treasury note due 2011 but subsequently designated a different reference security for the euro notes. The company said that holders of all three categories of notes tendering them by the early tender deadline and thus delivering consents to the proposed indenture changes would receive total consideration that would include a consent payment of $50 per $1,000 principal amount or €50 per €1,000 principal amount, as applicable; holders tendering after the early tender deadline would not receive the consent payment. All tendering holders would also receive accrued interest from the last interest payment date up to the settlement date.

Dana said that the proposed amendments to the notes' respective indentures that the holders were being asked to consent to would only become effective if Dana were to receive consents representing a majority of the outstanding principal amount of each issue of notes.

On Nov. 30, Dana announced that it had amended certain terms of the offer and had extended the early tender deadline for the 9% euro-denominated notes to 5 p.m. ET on Dec. 3 from Nov. 29. All other deadlines under the offer were unchanged.

It said that the consideration to be paid to holders tendering those notes would be calculated based on a fixed spread of 110 basis points over the 5% DBR security due July 4, 2011, rather than the 5% U.S. Treasury note due 2011 as originally announced.

Dana also increased the size of the tender offer to a total amount of $1.15 billion or equivalent from the originally announced $635 million or equivalent and said that thus, all notes properly tendered in the offer would be purchased, subject to the satisfaction of the offer's conditions, and there would not be any proration. It said that as of 5 p.m. ET on Nov. 29, a total of about $672 million or its equivalent total principal amount of the three series of notes had been tendered, including a majority in principal amount of each of the 10 1/8% notes and the 9% dollar-denominated notes, constituting the required consents sufficient to effect the proposed amendments to their respective indentures.

The company said that the settlement date for all notes tendered prior to the applicable early tender date for each series would be expected to occur on or about Dec. 10, while the settlement date for any notes tendered after the applicable early tender date would be promptly after the offer's expiration. The source of funds for the offer would include proceeds of the sale of Dana's automotive aftermarket businesses and the proceeds from additional debt incurred by Dana. The tender offer was amended to add a condition that Dana would have to consummate a financing transaction of at least $450 million to fund the offer (on Dec. 7, high-yield syndicate sources said that Dana had sold $450 million of new 5.85% notes due 2015).

On Dec. 6 Dana said that the early tender deadlines for the tender offer had expired and that as of 5 p.m. ET on Dec. 3, holders of $835 million or its equivalent total principal amount of the notes, or 76% of the notes covered by the offer, had tendered them under the terms of the offer. Dana said it had received the required consents to adopt its proposed amendments to the indenture of each of the three series of notes.

On Dec. 8, Dana said it had set the tender offer pricing, and that it would pay $1,128.58 per $1,000 principal amount for the 10 1/8% notes, including a $50 early tender payment. It said that as of the early tender deadline of 5 p.m. ET on Nov. 29, holders had tendered $169.502 million of the $250 million outstanding. Dana said it would pay $1,230.37 per $1,000 principal amount for the 9% dollar notes, including a $50 early tender payment. It said that as of 5 p.m. ET on Nov. 29, holders had tendered $445.43 million of the $575 million outstanding. And it said it would pay €1,269.64 per €1,000 principal amount for the 9% euro notes, including a €50 early tender payment. It said that as of 5 p.m. ET on Dec. 3, the early tender deadline for that particular class of notes, holders had tendered €163.658 million of the €200 million outstanding.

Banc of America Securities LLC was the coordinator for the offer and consent solicitation and a joint lead dealer manager for the offer and solicitation agent (call 888 292-0070 or collect at 212 847-5834, or +44 20 7174-4737). Deutsche Bank Securities (call 866 627-0391 or collect at 212 250-2955 or +44 20 7545-8011) and J.P. Morgan Securities (call 866 834-4666, or collect at 212 834-3424, or +44 20 7742-7506) also acted as joint-lead dealer managers.

D.F. King & Co. Inc. and D.F. King (Europe) Ltd. were the information agents for the offer (call 800 859-8509 or call collect at 212 269-5550, or +44 20 7920-9720).

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