Tower Automotive Inc. said Wednesday it will sell all its assets to Cerberus Capital Management LP in a deal valued at $1 billion -- a transaction that highlights the growing role of private equity firms in the restructuring of the U.S. automobile industry.
The sale will pay off Tower's $725 million debtor-in-possession loan and $41 million in second-lien loan obligations, according to Tower spokesman Joe Kirik. Tower's official committee of unsecured creditors supports the sale, which is expected to close on July 31 according to a company press release.
Tower, based in Novi, has been operating under Chapter 11 protection through the U.S. Bankruptcy Court in Manhattan since February 2005. Companies in Chapter 11 proceedings must submit their properties to an auction process even when a buyer is present, to ensure creditors receive the highest recovery on their debts.
Cerberus will serve as the lead bidder for Tower's properties, and if competing bids are offered an auction will be held in late June, Kirik said. The bid deadline is June 15.
Kirik said the transaction won't reduce the size of Tower's 10,000-plus global work force. Figures for U.S. personnel weren't available.
"We have accomplished a tremendous amount during the last few years to revitalize Tower so the company can strongly compete in today's global automotive marketplace," Kathleen Ligocki, Tower's president and chief executive, said in a statement Wednesday.
"The recapitalization of the company is the last major milestone in our restructuring process," she said.
Cerebus is also part of an effort to recapitalize Delphi Corp. through a capital infusion of as much as $3.4 billion. The hedge fund Appaloosa Management and Goldman Sachs Group Inc. also are involved in that effort.
Tower said it plans to submit by April 20 a Chapter 11 plan of reorganization explaining how creditors will be paid.
Tower Automotive is one of many auto-parts companies to enter bankruptcy amid production cutbacks by major U.S. vehicle manufacturers. Industry conditions have continued to plague Tower during its reorganization, as cuts in the manufacture of sport-utility vehicles and light trucks have persisted in North America.
Tower has said reduced production of these vehicles caused a "significant decline" in its 2006 financial performance.