Business Context and Reporting Period
This Form 8-K filing by Dana Holding Corporation (Dana) reports a material definitive agreement and the creation of a direct financial obligation. The report date is May 27, 2016, with the transaction closing on the same date and a news release issued on May 31, 2016.
Key Financial Metrics
The filing details a debt financing transaction rather than operational performance metrics. Key terms include:
- Principal Amount: $375,000,000
- Instrument: 6.500% Senior Notes due 2026
- Issuer: Dana Financing Luxembourg S.à r.l. (a wholly-owned subsidiary)
- Guarantor: Dana Holding Corporation (fully and unconditionally guaranteed)
- Interest Payment Dates: June 15 and December 15 annually, commencing December 15, 2016
- Maturity Date: June 1, 2026
The filing text does not provide values for revenue, profit, cash flow, margins, or existing liquidity positions.
Material Changes and Covenants
The issuance of the Notes represents a significant increase in Dana's unsecured senior indebtedness. The Indenture imposes restrictive covenants that limit the company's ability to:
- Incur additional debt
- Pay dividends or make other restricted payments
- Create or permit certain liens
- Use proceeds from asset sales
- Enter into affiliate transactions
- Consolidate, merge, or sell substantially all assets
These covenants may be relaxed if the Notes achieve an investment-grade rating (Moody's Ba1 or S&P BB+) and no default exists.
Redemption, Change of Control, and Risks
Redemption Terms:
- Equity Redemption: Prior to June 1, 2019, up to 35% of the principal may be redeemed using equity offering proceeds at 106.500% of principal.
- Make-Whole Redemption: Prior to June 1, 2021, the Issuer may redeem at 100% plus a make-whole premium.
- Call Schedule: On or after June 1, 2021, redemption prices decline from 103.250% (2021) to 100.000% (2024).
Change of Control: In the event of a change of control, Dana must offer to purchase the Notes at 101.000% of principal plus accrued interest.
Subordination: The Notes are senior unsecured obligations but are effectively subordinated to secured indebtedness and structurally subordinated to liabilities of other subsidiaries.
Investor Verification Checklist
- Verify the use of proceeds from the $375 million offering as disclosed in the attached news release (Exhibit 99.1).
- Review the full Indenture (Exhibit 4.1) for specific exceptions to the restrictive covenants.
- Confirm the current credit rating of Dana to assess the likelihood of covenant relief.
- Assess the impact of the new 6.500% interest expense on future cash flow and earnings.
- Monitor the company's ability to meet the first interest payment due December 15, 2016.