Dura Automotive committee: Sale terms ‘grim’ for unsecured creditors

By Caroline Salls

Pittsburgh, May 11 – Dura Automotive Systems, LLC’s official committee of unsecured creditors filed a limited objection Friday to the proposed sale of substantially all of the company’s assets, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

While it supports the goal of the sale preserving jobs and a going-concern business, the committee said the “terms of the sale are grim” for its constituency, despite the Dura debtors’ belief at the outset of the cases that unsecured creditors would get a substantial recovery.

“While Covid-19 may have weakened the debtors, their issues were apparent prior,” the objection said.

“[The court] was first advised in January that the debtors needed more liquidity to fund operations, more than a month prior to their original DIP budget’s expiration in mid-March and the Covid-19 pandemic.”

Even though it supports a going-concern sale because it allows employees, vendors and contract counterparties to obtain a recovery, the creditor group said it cannot support the fact that the proposed sale offers no recovery to holders of pre-bankruptcy claims.

In addition, the committee said its investigation uncovered valuable claims and causes of action that could be prosecuted on behalf of the Dura estates.

“Considering that the sale, as proposed, would leave the debtors’ bankruptcy estates without any assets to satisfy the claims of pre-petition creditors, the committee has requested that the purchaser either carve causes of action out of the purchased assets and/or leave some other assets behind in the debtors’ bankruptcy estates for the benefit of pre-petition creditors,” the objection said.

A hearing is scheduled for May 12.

Dura is an Auburn Hills, Mich.-based automotive parts maker. The company filed bankruptcy on Oct. 17, 2019 and the case was moved to the Delaware court under Chapter 11 case number 19-12378.

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