Tower Automotive and some of its subsidiaries have filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
The company filed its petition with the U.S. Bankruptcy Court for the Southern District of New York.
Tower said that while it benefited from recent short-term initiatives to improve liquidity, the company faced a number of recent setbacks that required that it evaluate long-term solutions. A reorganization filing provides the company with the most efficient way of addressing these issues while continuing normal business operations. The company reiterated that its operations are solid, performing well and will continue in the ordinary course.
President and CEO Kathleen Ligocki said, “Over the past twelve months, we have been focused on launching our significant new business backlog while taking the actions necessary to improve profitability and restore long-term financial strength to Tower so that we can continue to grow and meet our customers’ needs. Like many companies in the automotive sector, Tower has been affected by lower production volumes on key auto maker platforms and increased steel prices. Additionally, the recent termination of early pay programs at certain auto makers has adversely affected our liquidity. These factors, combined with a complex and restrictive capital structure and an unsustainable debt load have made it clear that a financial reorganization was necessary to resolve these issues. By reducing our debt to more manageable levels and simplifying our capital structure, we will be better able to respond to changes in the market place, satisfy the needs of our customers and help ensure our long-term viability.”
“Operationally, we continue to perform soundly. We have strong customer relationships and $1.4 billion of new business launching through 2005. We have a diverse product profile, and our ability to provide full product development capabilities ranging from design and analysis to prototype and testing as well as manufacturing make Tower a premier partner for auto makers. During the reorganization process, we will evaluate additional measures that enable us to operate as efficiently as possible and further enhance our ability to meet our customers’ requirements,” continued Ligocki.
In conjunction with its filing, the company has arranged commitments for up to $725 million in debtor-in-possession (“DIP”) financing from JPMorgan, subject to Court approval. Tower will pay post-petition vendors in the normal course of business, and has requested and expects to receive permission from the Court to continue to pay employee salaries, wages and benefits as usual.
“The financing, combined with our normal cash flow, should be more than adequate to enable Tower to continue normal business operations throughout this process,” said Ligocki.
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