Cerberus Capital Management has agreed to buy bankrupt auto parts maker Tower Automotive. Tower filed a restructuring term sheet, stating that it plans to file for Chapter 11 bankruptcy, with the Southern District of New York. According to reports, the value of the deal is about $1 billion.
The transaction will include the complete payment of obligations under the company’s debtor-In-possession credit facility and second lien loan facility, Tower said in a statement. It will also include the assumption of its pensions and recovery for unsecured creditors.
Cerberus has previously invested in the automotive industry. With Citigroup’s private equity unit, the firm led a consortium of investors in buying a majority of General Motors Acceptance Corp (GMAC), the financing arm of global automaker General Motors, in April 2006. That deal was worth about $14 billion.
Cerberus is also one of the candidates for the potential buyout of Chrysler, the US unit of German carmaker DaimlerChrysler AG. Other firms interested in Chrysler are Apollo Management, The Blackstone Group and The Carlyle Group.
“We have accomplished a tremendous amount during the last few years to revitalise Tower so the company can strongly compete in today’s global automotive marketplace,” Kathleen Ligocki, the president and chief executive officer of Tower, said in a statement. That process included diversifying its customer portfolio, the sale of non-essential businesses and the consolidation of the North American manufacturing facilities. It also involved negotiating settlements will the US labor unions, the statement said.
“The recapitalization is the last major milestone in our restructuring process,” Ligocki said.
Tower has been operating under Chapter 11 protection since February of 2005. The term sheet says that the company will file for Chapter 11 bankruptcy by April 20. Third parties may also submit competing bids by June 15. If other bids do come in, an auction will be held on June 21 to determine Tower’s fate, the statement said.
A closing is expected by July 31.
Tower designs and produces vehicle structural components used by a number of global automakers. Among its clients are BMW, DaimlerChrysler, Fiat, Ford, General Motors, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Tower’s products include body structures, lower vehicle frames and suspension components.