Zohar: Dura Automotive Systems will stipulate to case venue transfer

By Caroline Salls

Pittsburgh, Oct. 31 – Dura Automotive Systems, LLC will stipulate to a transfer of its Chapter 11 bankruptcy cases, currently pending in Middle Tennessee, to the U.S. Bankruptcy Court for the District of Delaware, according to an agenda filed in the Delaware court Thursday by Zohar III, Corp.

As previously reported, Zohar asked that the cases be moved to Delaware, and Dura objected to that request.

According to the objection filed in Zohar’s cases in the Delaware court, in recent months, “Dura has faced an existential liquidity crisis due to the long-running ownership dispute between Ms. Lynn Tilton and the Zohar funds, which has led prospective lenders to refuse to provide financing, made credit insurance more difficult to obtain and resulted in certain customers placing Dura on ‘no-bid’ lists, resulting in reduced liquidity and revenue.”

Dura said its independent managers determined that a Chapter 11 filing was necessary to obtain access to new capital, and various potential venue options were considered, including the Middle District of Tennessee, the Eastern District of Michigan, and the District of Delaware.

“In particular, Dura’s independent managers sought to determine which venue would facilitate the most active and convenient involvement of Dura’s customers, supply chain partners, other vendors and employees, as well as mitigate the overhang of the Zohar ownership dispute on Dura’s value-maximizing restructuring,” the objection said.

“The Middle District of Tennessee was the clear choice: it is home to two of Dura’s five U.S. plants, nearly half of Dura’s U.S. workforce, approximately 20 customers and over 450 trade vendors.”

Zohar said in its venue transfer motion that the Zohar debtors have substantial interests in the Dura debtors and hold $105 million principal amount of secured term loan debt in and have an indirect interest in the majority of the equity in the Dura debtors, “rendering them (among other bases) affiliates of the Zohar debtors.”

In addition, Zohar said the Delaware court approved a settlement agreement on May 21, 2018 under which the Zohar debtors, which are also affiliated with Tilton, agreed that Tilton and Zohar’s chief restructuring officer would conduct a monetization process to sell various portfolio companies in which Zohar has an interest. This includes the Dura debtors, according to the venue transfer motion.

Zohar said Tilton “orchestrated to put the Dura debtors, which Ms. Tilton has referred to as a ‘crown jewel’ portfolio company, into bankruptcy with the goal of providing DIP financing and an expedited 363 credit bid sale to herself.”

Dura is an Auburn Hills, Mich.-based automotive parts maker. The company filed bankruptcy on Oct. 17 under Chapter 11 case number 19-06741.

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