Hedge Funds Say Refinancing Is Unen-Dura-ble

Nov 15 2006 | 10:03am ET

Hedge funds claiming control of most of Dura Automotive System’s second-lien debt are crying foul at the Detroit auto-parts supplier’s debt refinancing plan.

Dura, which filed for bankruptcy protecting last month, has proposed a $300 million debtor-in-possession financing plan to pay off $125 million in first-lien debt, leaving it with about $175 million in financing. It’s that latter part that worries the second-lien hedge fund group, which includes Contrarian Funds, D.E. Shaw & Co. and Merrill Lynch Capital, because they see it as an added layer of debt between them and their collateral: the company’s $2 billion in assets.

In a filing Monday, the hedge fund committee said it would seek the continuation of the “adequate protection” package first- and second-lien creditors negotiated prior to the bankruptcy filing, guaranteeing monthly interest payments, as well as footing the bill for legal and financial advisors.

Both the DIP plan and the hedge fund motion are set for review on Monday.

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