================================================================= TOWER AUTOMOTIVE BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) February 7, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- TOWER AUTOMOTIVE BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Kenneth Rae V. Bramida, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of TOWER AUTOMOTIVE BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO TOWER AUTOMOTIVE BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF TOWER AUTOMOTIVE [00002] TOWER AUTOMOTIVE'S BALANCE SHEET AT SEPTEMBER 30, 2004 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] TOWER AUTOMOTIVE CHAPTER 11 DATABASE [00005] TOWER AUTOMOTIVE'S 30 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL [00008] DEBTORS' MOTION TO OBTAIN $725,000,000 OF DIP FINANCING KEY DATE CALENDAR ----------------- 02/02/05 Voluntary Petition Date 02/17/05 Deadline for filing Schedules of Assets and Liabilities 02/17/05 Deadline for filing Statement of Financial Affairs 02/17/05 Deadline for filing Lists of Leases and Contracts 02/22/05 Deadline to provide Utilities with adequate assurance 04/05/05 Deadline to make decisions about lease dispositions 05/03/05 Deadline to remove actions pursuant to F.R.B.P. 9027 06/02/05 Expiration of Debtors' Exclusive Plan Proposal Period 08/01/05 Expiration of Debtors' Exclusive Solicitation Period 02/02/07 Deadline for Debtors to Commence Avoidance Actions Organizational Meeting with UST to form Committees First Meeting of Creditors pursuant to 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO TOWER AUTOMOTIVE BANKRUPTCY NEWS ----------------------------------------------------------------- TOWER AUTOMOTIVE BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) TOWER AUTOMOTIVE BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceeding. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of TOWER AUTOMOTIVE BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF TOWER AUTOMOTIVE ----------------------------------------------------------------- Tower Automotive, Inc. 27175 Haggerty Road Novi, Michigan 48377 (248) 675-6000 http://www.towerautomotive.com/ Tower Automotive, Inc., and its subsidiaries, design, manufacture and sell structural components and assemblies used by every major automotive original equipment manufacturer. Tower's customers include Ford, DaimlerChrysler, Renault/Nissan, Volkswagen Group, General Motors, Toyota, Honda, BMW, Fiat, Hyundai/Kia, Mazda and Isuzu. The Company supplies products for many of the most popular car, light truck and sport utility models, including the Ford Five Hundred, Freestyle, Focus, Explorer, Ranger and F-Series pickups, Chevrolet Silverado and GMC Sierra pickups, Dodge Ram pickup, Toyota Camry, Honda Accord and Civic and Nissan Frontier/Pathfinder and Nissan Titan/Armada. The Company's 2003 revenues were over $2.8 billion and gross sales for 2004 top $3.1 billion. Based on revenues, Tower is the largest independent global supplier of structural components and assemblies to the automotive market. According to James Mallak, the Company's Chief Financial Officer and Treasurer, Tower was founded in 1993 as a holding company for the purpose of acquiring R.J. Tower Corporation. Tower is the ultimate parent company, and R.J. Tower serves as the intermediate holding company, holding direct or indirect ownership interests in the Company's approximately 70 domestic and foreign subsidiaries. Tower's common stock was publicly traded on the New York Stock Exchange under the "TWR" ticker symbol and now trades over the counter under the "TWRAQ" ticker symbol. Internal Growth & Acquisitions Since 1993, the Company's revenues grew rapidly through internal growth and acquisitions. From 1993 to 2000, the Company successfully completed 14 acquisitions and established six joint ventures in China, Mexico, Korea, Japan and the United States. The Korean joint venture is now a wholly owned subsidiary. As a result of these acquisitions and internal growth, Mr. Mallak says, the Company's revenues increased from approximately $86 million in 1993 to approximately $3.1 billion in 2004. As part of its expansion, the Company owns or has significant ownership interests in over 50 manufacturing, product development and administrative facilities located in North America, South America, Europe and Asia. In 2003, 71% of the Company's sales were made in the U.S. and Canada, 15% in Europe, 13% in Asia and 1% in South America. Only one of the Company's foreign subsidiaries is a Debtor. The Company's foreign operations are conducted through independent business units under the direction of local management, and are separate and distinct from the U.S. operations, Mr. Mallak explains. The Company's foreign operations enjoy positive cash flows, and the Company expects that its foreign operations will continue to function as healthy, independent businesses. The foreign subsidiaries do not materially rely on funding from the U.S. entities, and the Company does not expect that its Chapter 11 Cases will have any material adverse impact on the foreign operations. Employees As of the Petition Date, the Debtors employ approximately 7,700 employees, of whom approximately 6,410 are hourly employees, 1,290 are full-time salaried employees, and approximately 30 are part-time employees. Certain of the Hourly Employees are members of labor unions represented under separate collective bargaining agreements. The Company successfully renegotiated three collective bargaining agreements in 2004, and five other collective bargaining agreements are set to expire in 2005. The Company has also instituted a number of employee incentive programs to increase employee morale and expand the employee participation in the Company's business. Since its inception in 1993, the Company has not experienced any significant work stoppages and considers its relations with its employees to be good. Production Operations The Company continues to build its competitive advantage through investment in product development, advanced engineering and program management. As a result of this investment, and of the consolidation among suppliers of automotive structural components and assemblies, the Company believes that it is one of only a select group of suppliers able to provide automotive OEMs with broad technical design, engineering and program management capabilities with respect to the entire body structure of a vehicle on a global basis. Indeed, the Company works with OEMs throughout the product development process from concept vehicle and prototype development through the design and implementation of manufacturing processes. In some cases, the company places design engineers at customer facilities to coordinate its product design efforts with those of its OEM customers. OEMs typically award contracts that cover parts to be supplied for a particular vehicle model or platform. Such contracts range from one year to over the life of the model, which is generally three to ten years, and do not require the purchase of any minimum number of parts by the OEM. Most of the parts the Company produces have a lead time of two to five years from product development to production. The Company produces a broad range of structural components and assemblies, many of which are critical to the structural integrity of a vehicle. The Company's products generally can be classified into the following categories: -- body structures and assemblies; -- lower vehicle structures; -- suspension and powertrain modules; -- suspension components; and -- other products. (a) Body Structures and Assemblies Body structures and assemblies include products that form the basic upper body structure of the vehicle and include large metal stampings such as body pillars, roof rails, side sills, parcel shelves and intrusion beams. This category also includes "class A" surfaces and assemblies, including exposed sheet metal components such as body sides, pick-up box sides, door panels and fenders. Body structures and assemblies represented approximately 43% of global revenues for the Company in 2003. (b) Lower Vehicle Structures Lower vehicle structures include products that form the basic lower body structure of the vehicle and include heavy gauge metal stampings from both traditional and hydroforming methods, such as pickup truck and SUV full frames, automotive engine and rear suspension cradles, floor pan components and cross members. Critical to the strength and safety of vehicles, these products carry the load of the vehicle and provide crash integrity. Lower vehicle structures represented approximately 34% of global revenues in 2003. (c) Suspension and Powertrain Modules Suspension and powertrain module products include axle assemblies, which consist of stamped metal trailing axles, assembled brake shoes, hoses and tie rods, and front and rear structural suspension modules and systems. These modules and systems consist of control arms, suspension links, value-added assemblies and powertrain modules. Suspension and powertrain modules represented approximately 12% of global revenues in 2003. (d) Suspension Components Suspension components include stamped, formed and welded products, such as control arms, suspension links, track bars, spring and shock towers and trailing axles. These suspension components are critical to the ride, handling and noise characteristics of a vehicle. Suspension components represented approximately 8% of global revenues in 2003. (e) Other Products Finally, the Company manufactures a variety of other products, including heat shields and other precision stampings, for its OEM customers. These miscellaneous other products represented approximately 3% of global revenues in 2003. Summary of Prepetition Indebtedness As of September 30, 2004, the Company's non-current liabilities were approximately $1.6 billion. Of this amount, approximately $1.35 billion related to long-term debt, approximately $35 million related to obligations under capital leases and approximately $214 million related to other non-current liabilities. The Company's primary long-term debt obligations are: A. Senior Secured Credit Facilities On May 24, 2004, the Company entered into a senior secured credit facility with Morgan Stanley Senior Funding, Inc. and J.P. Morgan Securities Inc., as sole and exclusive joint book runners and lead arrangers, Morgan Stanley Senior Funding, Inc., as administrative agent, JP Morgan Chase Bank, as syndication agent, Standard Federal Bank, as collateral agent, and other lenders. The Senior Credit Facility provides for aggregate borrowings by R.J. Tower of up to $580.0 million, consisting of: -- a five-year revolving credit facility of up to $50.0 million, including a $25.0 million sub-facility for the issuance of letters of credit; -- a five-year term loan facility in aggregate principal amount equal to $375.0 million; and -- a synthetic letter of credit facility in an amount equal to $155.0 million. On the closing date of the Senior Credit Facility, the Company borrowed $46.5 million under the revolving credit facility, and issued letters of credit totaling $3.5 million. In addition, the term loan was fully drawn. As of Sept. 30, 2004, no amounts were available for borrowing under the revolving credit facility or the term loan. The revolving credit facility was used solely for working capital requirements and other corporate purposes. The borrowings under the term loan facility were used, together with a portion of the net proceeds from the sale of certain debentures: (1) to repay outstanding indebtedness under the old senior credit facility, (2) to redeem a series of convertible notes due in 2004, (3) to pay fees and expenses incurred in connection with the refinancing transactions, and (4) for general corporate purposes. The $155.0 million synthetic letter of credit facility was issued on the closing date of the Senior Credit Facility to replace or backstop letters of credit outstanding under R.J. Tower's previous senior credit facility that supported operating leases, capitalized leases of $4.0 million, industrial development revenue bonds issued before the year 2000, workers' compensation obligations and to backstop an obligation outstanding under an interest rate hedging agreement. The lenders participating in the letter of credit facility deposited the full amount in a trust account held by Standard Federal Bank for the benefit of the issuer of such letters of credit. If a letter of credit is drawn under the synthetic letter of credit facility and not reimbursed in full by R.J. Tower, each participating lender's ratable share of the deposit will be applied automatically in satisfaction of the reimbursement obligation, and each participating lender will be deemed to have made a loan to R.J. Tower in such amount. R.J. Tower does not have an interest in any funds on deposit and does not account for such funds as indebtedness when deposited in the trust account. Indeed, the synthetic letter of credit facility will be reflected as debt on the Company's balance sheet only if and to the extent there are outstanding payments by the facility with respect to letters of credit. As of September 30, 2004, the Company had issued letters of credit totaling approximately $153.4 million under the facility, all of which were undrawn. The revolving credit facility and term loan mature on May 24, 2009. The synthetic letter of credit facility matures on January 29, 2010. The obligations of R.J. Tower under the Senior Credit Facility are guaranteed by Tower and all of R.J. Tower's direct and indirect existing and future domestic restricted subsidiaries. R.J. Tower's obligations under the revolving credit facility and the term loan are secured by a first priority lien and security interest in the: -- capital stock of R.J. Tower and all of its domestic subsidiaries; -- the present and future property and assets, real and personal, tangible and intangible (subject to customary exceptions), of Tower, R.J. Tower and all of its domestic restricted subsidiaries; and -- the proceeds and products of such property and assets. The obligations of R.J. Tower under the synthetic letter of credit facility are secured by a second priority lien and security interest in the same collateral as the first priority lien, other than the principal manufacturing facilities owned by R.J. Tower or any of its subsidiaries that are located in the United States or shares of capital stock or indebtedness of any restricted subsidiary. The book value of collateral underlying the Senior Credit Facility is approximately $1.1 billion. B. The Indentures -- 12% Senior Notes R.J. Tower issued the 12% senior notes under an indenture, dated June 13, 2003, among itself, Tower, certain subsidiary guarantors and BNY Midwest Trust Company, as trustee. The current outstanding aggregate principal amount of the 12% senior notes is $258.0 million. The 12% senior notes are general unsecured obligations of R.J. Tower, and rank senior in right of payment to all existing and future indebtedness of R.J. Tower that is expressly subordinated to the 12% senior notes. The 12% senior notes rank equally in right of payment with all existing and future liabilities of R.J. Tower that are not so subordinated, but are effectively subordinated to the liabilities of R.J. Tower's subsidiaries that do not guarantee the 12% senior notes. All of R.J. Tower's domestic subsidiaries have, jointly and severally, unconditionally guaranteed, on a senior unsecured basis, R.J. Tower's obligations under the 12% senior notes and all of its obligations under the 12% Notes Indenture. The obligations of subsidiary guarantors rank equally in right of payment with other indebtedness of such subsidiary guarantor, except to the extent that such other indebtedness is expressly subordinate to the obligations arising under the subsidiary guarantee. -- 9.25% Senior Euro Notes In July 2000, R.J. Tower issued EUR150,000,000 of 9.25% senior notes due in 2010 pursuant to an indenture, dated as of July 25, 2000, among R.J. Tower, as issuer, certain guarantors and the United States Trust Company of New York, as trustee. The Euro-denominated senior notes are limited to an aggregate principal amount to of EUR200,000,000, and will mature on August 1, 2010. The interest on the 9.25% senior notes is payable semi-annually on February 1 and August 1 of each year. The notes are listed on the Luxembourg Stock Exchange, and the net proceeds of such offering were used to repay outstanding indebtedness. The 9.25% senior notes are unsecured obligations of R.J. Tower, equal in right of payment with all other unsecured and unsubordinated indebtedness of R.J. Tower, and senior in right of payment to the outstanding and future subordinated indebtedness of R.J. Tower. Further, each of R.J. Tower's domestic subsidiaries that has guaranteed indebtedness under the Senior Credit Facility also unconditionally guarantees payment on a joint and several basis of all of R.J. Tower's obligations under the 9.25% Notes Indenture and the 9.25% senior notes. The guarantees are unsecured obligations of the guarantors, equal in right of payment with all other unsecured and unsubordinated indebtedness of the guarantors, and senior in right of payment to the outstanding and future subordinated indebtedness of such guarantors. -- 6.75% Trust Convertible Subordinated Debentures On June 9, 1998, Tower Automotive Capital Trust, a Delaware statutory business trust created at Tower's direction, completed the offering of $258.8 million in aggregate liquidation preference of 6.75% trust preferred securities. The Trust Preferred Securities resulted in net proceeds of approximately $249.7 million, which were used to repay outstanding indebtedness of the Company. Tower owns all of the outstanding common securities issued by the Trust, and the sole assets held by the Trust are Tower's 6.75% convertible subordinated debentures, due June 30, 2018, that were issued in an aggregate principal amount of $266.8 million. Distributions on the Trust Preferred Securities are payable at the annual rate of 6.75% of the liquidation amount of $50 per Trust Preferred Security (equivalent to $3.375 per Trust Preferred Security per annum) if, as and when the Trust has funds available for payment. Distributions are payable quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing September 30, 1998. Distributions not made on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to 6.75%. The ability of the Trust to pay distributions on the Trust Preferred Securities is entirely dependent on its receipt of payments with respect to the 6.75% convertible subordinated debentures held by the Trust. The convertible subordinated debentures provide that payments of interest may be deferred at any time, and from time to time, by Tower for a period not exceeding 20 consecutive quarters. If interest payments on the convertible subordinated debentures are so deferred, distributions on the Trust Preferred Securities will also be deferred, and Tower will not be permitted, subject to certain exceptions, to declare and pay cash distributions with respect to its capital stock or debt securities that rank pari passu with or junior to those debentures. On December 3, 2004, the Company announced that it was exercising its right to defer the dividend payment on the Trust Preferred Securities that would otherwise have been paid on December 31, 2004. The Trust Preferred Securities are convertible, at the option of the holder, into the Company's common stock at a rate of 1.6280 shares of common stock for each Trust Preferred Security, which is equivalent to a conversion price of $30.713 per share. The payment of distributions by the Trust and payments on liquidation of the Trust or the redemption of Trust Preferred Securities are guaranteed on a subordinated basis by Tower to extent the Trust has funds available therefor. Tower's obligation under the guarantee is subordinate and junior in right to payment of all of its other liabilities, and ranks pari passu with the most senior preferred stock, if any, issued from time to time by Tower. Tower's obligations under the 6.75% convertible subordinated debentures are subordinate and junior in right of payment to all senior debt of Tower. The term "senior debt" is generally defined under the indenture to mean any indebtedness of Tower for money borrowed, except for trade credit and any such indebtedness that is by its terms subordinated to or pari passu with the 6.75% convertible subordinated debentures, as the case may be. Tower's obligations under the guarantee and the 6.75% convertible subordinated debentures are effectively subordinated to all existing and future obligations of Tower's subsidiaries. -- 5.75% Convertible Senior Notes On May 24, 2004, Tower issued certain 5.75% debentures under an indenture between Tower and BNY Midwest Trust Company, as trustee. The debentures and the shares of common stock issuable upon conversion of the debentures are covered by a registration rights agreement, dated as of May 24, 2004, among Tower and the initial purchasers. The 5.75% debentures are general unsecured senior obligations of the Company and rank equally in right of payment to any present or future senior debt of the Company, including its existing and future unsecured subordinated indebtedness and its guarantee of the 12% senior notes. The 5.75% debentures are limited to an aggregate principal amount of $125,000,000 and mature on May 15, 2024, unless earlier converted, repurchased or redeemed. The debentures accrue interest at a rate of 5.75% each year payable in cash on each May 15 and November 15, beginning November 15, 2004. Holders of the 5.75% debentures have the option, subject to fulfillment of certain conditions and during certain periods, to convert their debentures into shares of common stock at an initial conversion rate of 231.0002 shares of the Company's common stock per $1,000 principal amount of debentures to be converted. This is equivalent to an initial conversion price of approximately $4.33 per share of common stock. The conversion rate is subject to adjustment if certain events occur. Upon a surrender of debentures for conversion, the Company will have the right to deliver, in lieu of shares of its common stock, cash or a combination of cash and shares of common stock in amounts described in the debenture. All debentures converted on any day will receive the same form of conversion payment, namely, cash, shares of the Company's common stock or a combination of the two. The debentures bear interest at a rate of 5.75% per annum. Interest is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 1, 2004. C. 2004 Securitization Facility On or about December 30, 2004, the Company closed a $50 million trade receivables securitization facility with General Electric Commercial Finance that provided $44 million in initial proceeds. Under the GE Securitization Facility all eligible receivables are sold to Tower Automotive Asset Securitization Company, L.L.C., a non-debtor special purpose entity wholly owned by R.J. Tower. To the extent that TAASC holds receivables in excess of the collateral base pledged under the GE Securitization Facility, the value of such receivables is reflected as either a capital contribution by R.J. Tower to TAASC, or as a note payable from TAASC to R.J. Tower. The securitization facility is set to expire in December, 2007. As of January 17, 2005, the GE Securitization Facility was fully utilized. D. Foreign Indebtedness As of September 30, 2004, R.J. Tower's foreign subsidiaries had an aggregate of $142.6 million of outstanding indebtedness. For the most part, borrowings by the Company's foreign subsidiaries are made under credit agreements with commercial lenders in their jurisdictions and are used to fund working capital and other operating requirements. Tower has guaranteed $70.6 million of the outstanding borrowings of its foreign subsidiary Seojin, up to a limit of approximately $105.7 million. Tower's guarantees expire on various dates, with certain of the guarantees expiring in April 2005 and others expiring at the same time as the underlying borrowings come due. Certain foreign subsidiaries of R.J. Tower are subject to restrictions on their ability to dividend or otherwise distribute cash to R.J. Tower because they are subject to financing arrangements that restrict them from paying dividends. Restructuring Transactions Initially, the Company's growth came primarily from acquisitions of North America-based automotive suppliers, certain of which had international operations. The Company succeeded in consolidating a portion of the North American automotive supplier base for structural components and assemblies and established itself as a key supplier of those products. The Company's more recent acquisitions have been intended to strengthen its ability to supply products on a global basis, grow its technology and manufacturing capabilities, and diversify its customer base. The Company's rapid growth through acquisitions coincided with an extended period of increased automotive production that resulted in high levels of utilization of the Company's acquired resources and capacity and contributed to periods of strong operating results. Beginning in late 2000, automotive production declined relative to prior periods, leading the Company to focus its efforts on reducing the capacity of the enterprise and improving the efficiency of its continuing operations. These efforts resulted in several significant operational and financial restructurings that reduced excess capacity, eliminated redundant overhead costs and reorganized the management structure of the Company's U.S. and Canadian operations. These efforts also involved the divestiture of certain non-core functions, including the sale of the Company's heavy truck business in December 2000 to its joint venture, Metalsa S. del R.L. (Mexico). Prior to these restructuring efforts, the Company did not undertake any significant reductions in the scope of its operations or any capacity rationalizations as a result of or following any of its prior acquisitions. The automotive market continues to be highly cyclical and dependent upon consumer spending. Due to the relatively long lead times required to produce many of the Company's complex structural components, it is often difficult, in the short term, for the Company to obtain new sales to replace any decline in the sales of existing products. As a result, over the last several years, the Company has implemented and continues to pursue the actions necessary to mitigate the effects of any production downturn, focusing on reducing costs, maximizing its cash return on invested capital, reducing debt balances and matching capital expenditures with operation cash flow. A. 2001 Restructuring Transactions In October 2001, the Company's board of directors approved a restructuring of the enterprise that included the closing of a facility in Sebewaing, Michigan. In addition, in December 2001, the Company's board of directors approved a restructuring plan that related to the consolidation of technical activities and a reduction of salaried employees in conjunction with a reorganization of the Company's U.S. and Canadian operations and the relocation of some component manufacturing from the Company's Milwaukee, Wisconsin press operations to other Tower locations. As a result of these transactions, the Company recorded a restructuring charge in the fourth quarter of 2001 of $178.1 million, which reflected the estimated qualifying "exit costs" to be incurred pertaining to the 2001 restructuring transactions. These activities resulted in a reduction of more than 700 employees in the Company's technical and administrative centers in Novi, Rochester Hills, and Grand Rapids, Michigan, Milwaukee, Wisconsin, and its U.S. and Canadian manufacturing locations. B. 2002 Restructuring Transactions On January 31, 2002, the Company announced that it would discontinue the remaining stamping and ancillary processes performed at its Milwaukee, Wisconsin press operations and relocated the remaining work to other Tower locations or Tier II suppliers. The Company substantially completed the transfer in 2002. As a result of these efforts, the Company recorded a net restructuring charge of $61.1 million for 2002. C. 2003 Restructuring Transactions The Company announced in October 2003 plans to consolidate its Novi, Michigan North America oversight and Grand Rapids, Michigan corporate office activities and close its Rochester Hills, Michigan prototype tooling and technical center facility. Qualifying exit costs relating to these activities were recognized by the Company in the fourth quarter of 2003 totaling $3.7 million. On May 27, 2003, the Company announced that it would transfer the production of high-volume frame assemblies for the Ford Ranger program from its Milwaukee, Wisconsin facility to its Bellevue, Ohio facility. During 2003, the Company recorded $25.0 million pre-tax restructuring and asset impairment charges relating to this event. These charges reflected estimated qualifying "exit costs" comprising cash charges of $6.1 million, pension and other post-retirement benefit plan curtailment costs of $6.3 million and non-cash asset impairment charges of $12.6 million, all within the United States/Canada reportable unit. On December 5, 2003, the Company announced that it had decided not to proceed with the relocation of the Ford Ranger line based on revised economic factors from the original May 2003 decision, principally due to concessions received from the Milwaukee, Wisconsin labor unions and a need for management to focus on its 2004 new product launch schedule. Because the Company's measurement date for pension and post-retirement benefits is September 30, and the decision to continue Ranger frame production in Milwaukee was made in December 2003, the curtailment loss was reversed in the first quarter of 2004. The remaining charges related to the original decision to move the Ranger frame production will not be reversed. Events Leading to the Chapter 11 Cases Notwithstanding the restructuring activities, the Company has still encountered significant operational and financial difficulties. A series of recent developments have resulted in a reduction of the Company's liquidity position, thereby jeopardizing near-term payment obligations and threatening the Company's ability to continue to pursue necessary growth and development initiatives. First, the market share and overall production of the Company's largest North American customers has declined in recent years. The Company typically supplies its customers on a requirements basis, and is not guaranteed any set volume of business. Therefore, when the Company's customers decrease production, the volume of the Company's business simultaneously decreases. Second, the Company has recently experienced certain commodity price increases. Notably, the cost of steel has increased significantly, and certain of the Company's supply contracts are for fixed prices that do not allow the Company to pass through increased material costs. Third, during the third quarter of 2004, certain of the Company's OEM customers gave notice that they were terminating their accelerated payments programs for all of their suppliers, including the Company. The termination of these programs has had a material adverse impact on the Company's short-term liquidity position by pushing back the dates by which the Debtors receive certain payments. Fourth, the Company has not always been able to achieve its desired level of cost savings with respect to existing product lines. In many cases, long-term supply contracts with the Company's customers call for regular price decreases. In cases where the Company is unable to achieve cost savings sufficient to offset these price decreases, the Company's profit margin decreases accordingly. Finally, the Company has incurred significant costs in the past several years related to the launch of new business lines. For example, the Company had a significant amount of new product launch activity in 2004. Unforeseen difficulties in managing these new launches resulted in higher than anticipated new launch program costs, which had an adverse effect on gross margins and profitability. As a result of these factors, and several others, the Company has endured a steady decline in its gross margin in each of the past four years, from 14.7% in 2000 to 11.2% in 2001, 10.8% in 2002, 9.1% in 2003, and only 7.1% for the first nine months of 2004. The steady deterioration of their liquidity position has forced the Debtors to seek chapter 11 protection as they restructure their operations and their balance sheet, in an effort to return to profitability. Indeed, it has become apparent that the Debtors will not be able to continue to service their debt obligations at current levels. Moreover, the Debtors' current debt levels threaten to eventually impair their ability to make the necessary investments to grow and sustain their businesses. Therefore, the Debtors will be working with their principal economic stakeholders regarding an overall balance sheet restructuring. By de-leveraging their balance sheet and addressing operational issues as necessary, the Debtors expect to use these Chapter 11 Cases to return to profitability and to put themselves in a position to grow for the future. ----------------------------------------------------------------- [00002] TOWER AUTOMOTIVE'S BALANCE SHEET AT SEPTEMBER 30, 2004 ----------------------------------------------------------------- TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands - unaudited) At September 30, 2004 Assets Current assets: Cash and cash equivalents $144,980 Accounts receivable 380,526 Inventories 136,967 Deferred income taxes, net 15,203 Prepaid tooling and other 149,994 ----------- Total current assets 827,670 ----------- Property, plant and equipment, net 1,168,751 Investments in joint ventures 208,023 Deferred income taxes 164,413 Goodwill 497,110 Other assets, net 160,022 ----------- $3,025,989 =========== Liabilities and Stockholders' Investment Current liabilities: Current maturities of long-term debt and capital lease obligations $101,811 Convertible Subordinated Notes, 5% due 2004 - Accounts payable 668,533 Accrued liabilities 246,810 ----------- Total current liabilities 1,017,154 ----------- Long-term debt, net of current maturities 1,232,474 Convertible Senior Debentures 121,636 Obligations under capital leases, net of current maturities 35,353 Other non-current liabilities 214,371 ----------- Total non-current liabilities 1,603,834 ----------- Stockholders' investment: Common stock 666 Additional paid-in capital 681,055 Retained deficit (192,707) Deferred compensation (7,791) Accumulated other comprehensive loss (26,898) Treasury stock (49,324) ----------- Total stockholders' investment 405,001 ----------- $3,025,989 =========== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- Normal Operations Continue Receives Commitment for $725 million in DIP Financing from JPMorgan NOVI, Michigan -- February 2, 2005 -- Tower Automotive, Inc. (NYSE: TWR) today announced that it and certain of its subsidiaries have filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code in order to address liquidity needs and facilitate a debt restructuring. 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. Kathleen Ligocki, President and Chief Executive Officer of Tower Automotive, 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. International Operations Tower's international operations in Europe, Asia, Brazil and Canada are not included in the Chapter 11 reorganization, and their operations continue to operate as always. "Our business outside of the U.S. is strong and profitable, and we expect no change in our international operations," said Ligocki. Tower has retained Kirkland &Ellis LLP as its restructuring counsel. Rothschild Inc. is serving as Tower's investment banker, and FTI Consulting is serving as Tower's financial advisor. Tower has established a Vendor Relations Call Center to answer questions from its suppliers. The phone number is 1-866- TOWER-30. Suppliers outside the U.S. can call +1-248-675-6745. Additional information is also available on the company's web site at http://www.towerautomotive.com/ The Company also noted that it did not make the interest payment due on February 1, 2005, on the 9.25% RJ Tower Corporation senior Euro notes. About Tower Automotive Tower Automotive, Inc., is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. Additional company information is available at http://www.towerautomotive.com/ ----------------------------------------------------------------- [00004] TOWER AUTOMOTIVE CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Tower Automotive, Inc. 27275 Haggerty Road Novi, Michigan 48377 Lead Case No. 05-10578 Court: United States Bankruptcy Court Southern District of New York Alexander Hamilton Customs House One Bowling Green, 5th Floor New York, New York 10004-1408 Telephone (212) 668-2870 Debtor-affiliates filing separate chapter 11 petitions: Case No. Debtor Entity -------- ------------- 05-10576 Tower Automotive, s.r.o. 05-10577 Algoods, USA, Inc. 05-10579 R.J. Tower Corporation 05-10580 Tower Automotive Bardstown, Inc. 05-10581 Tower Automotive Bowling Green, LLC 05-10582 Tower Automotive Chicago, LLC 05-10583 Tower Automotive Finance, Inc. 05-10584 Tower Automotive Granite City, LLC 05-10585 Tower Automotive Granite City Services, LLC 05-10586 Tower Automotive International, Inc. 05-10587 Tower Automotive International Holdings, Inc. 05-10588 Tower Automotive International Yorozu Holdings, Inc. 05-10589 Tower Automotive Lansing, LLC 05-10590 Tower Automotive Madison, LLC 05-10591 Tower Automotive Michigan, LLC 05-10592 Tower Automotive Milwaukee, LLC 05-10593 Tower Automotive Plymouth, Inc. 05-10594 Tower Automotive Products Company, Inc. 05-10595 Tower Automotive Receivables Company, Inc. 05-10596 Tower Automotive Services and Technology, LLC 05-10597 Tower Automotive Technology, Inc. 05-10598 Tower Automotive Technology Products, Inc. 05-10599 Tower Automotive Tool, LLC 05-10600 Tower Services, Inc. 05-10601 Trylon Corporation d/b/a Tower Automotive Type of Business: The Debtor and certain of its subsidiaries produce a broad range of assemblies and modules for vehicle frames, upper body structures and suspension systems for the global automotive industry. See http://www.towerautomotive.com/ Judge: The Honorable Allen L. Gropper Debtors' Bankruptcy Counsel: James H.M. Sprayregen, Esq. James H.M. Sprayregen, P.C. KIRKLAND & ELLIS LLP Citigroup Center 153 East 53rd Street New York, New York 10022-4611 Telephone (212) 446-4800 - and - Ryan B. Bennett, Esq. Anup Sathy, Esq. Jason D. Horwitz, Esq. Ross M. Kwasteniet, Esq. KIRKLAND & ELLIS, LLP 200 East Randolph Drive Chicago, IL 60601-6636 Telephone (312) 861-2000 Debtors' Conflicts Counsel: Albert Togut, Esq. TOGUT, SEGAL & SEGAL LLP One Penn Plaza New York, New York 10119. Debtors' Special Counsel: Michael Wooldridge, Esq. VARNUM, RIDDERING, SCHMIDT & HOWLETT LLP 333 Bridge Street, Suite 1700 Grand Rapids, Michigan 49504 - and - VARNUM, RIDDERING, SCHMIDT & HOWLETT LLP 39555 Orchard Hill Place, Suite 600 Novi, Michigan 48375 Debtors' Investment Banker: David L. Resnick Managing Director ROTHSCHILD INC. 1251 Avenue of the Americas New York, New York 10020 Debtors' Financial Advisor: Jeffrey J. Stegenga FTI Consulting, Inc. 2001 Ross Avenue, Suite 400 Dallas, TX 75201 Telephone (214) 397.1608 Debtors' Corporate Communications Consultant: Robert Mead Gavin Anderson & Company 220 East 42nd Street, Suite 408 New York, New York 10017 Telephone (212) 515-1900 Debtors' Claims Agent: Ron Jacobs Bankruptcy Services LLC 757 Third Avenue, 3rd Floor New York, NY 10017 Agent for Prepetition Lenders: Silver Point Capital Fund, L.P. Prepetition Lenders' Counsel: James Tecce, Esq. Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, New York 10005-1413 DIP Lender: Norma C. Corio Managing Director JPMORGAN CHASE BANK, N.A. 270 Park Avenue New York, New York 10017 United States Trustee: Deirdre A. Martini United States Trustee for Region 2 33 Whitehall Street, Suite 2100 New York, NY 10004 Telephone: 212-510-0500 Fax: 212-668-2256 Financial Condition as of January 31, 2005: Total Assets: $787,948,000 Total Debts: $1,306,949,000 ----------------------------------------------------------------- [00005] TOWER AUTOMOTIVE'S 30 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of New York - Midwest 12% High Yield Notes $251,300,000 2 N. LaSalle Street Suite 1020 Chicago, IL 60602 Attn: Roxanne Ellwanger 312-827-8584 Bank of New York Eurobonds $203,600,000 2 N. LaSalle Street Suite 1020 Chicago, IL 60602 Attn: Roxanne Ellwanger 312-827-8584 Bank of New York 5.75% Convertible $121,600,000 2 N. LaSalle Street Senior Debentures Suite 1020 Chicago, IL 60602 Attn: Roxanne Ellwanger 312-827-8584 Worthington Steel Co. Trade Payable $20,004,571 905 Dearborn Dr., Door 260 Columbus, OH 43085 Attn: John Jessee (513) 539-6358 (513) 539-6328 (fax) GMAC Lansing Lease $16,200,000 210 Interstate North Parkway Suite 315 Atlanta, GA 30339 Attn: Pat Riley 678-553-2716 Bosch Rexroth Corporation Trade Payable $11,083,499 1701 Harmon Road Auburn Hills, MI 48326 Attn: Nikki Pearson (248) 393-3330 (248) 393-8050 (fax) Continental Teves, Inc. Trade Payable $9,755,444 4141 Continental Drive Auburn Hills, MI 48326 Steel Technologies Trade Payable $9,490,124 1161 Solutions Center Chicago, IL 60677-1001 Attn: Kim Gregonis (877) 293-5257 (502) 254-4293 (fax) Comau Pico Trade Payable $6,910,941 21000 Telegraph Rd. Southfield, MI 48034 Attn: Keneth Lesperance (248) 368-2214 (248) 368-2583 (fax) Delphi Trade Payable $6,893,816 5725 Delphi Dr. Troy, MI 48098 Denso Trade Payable $5,906,053 24777 Denso Drive P.O. Box 5133 Southfield, MI 48086 (248) 350-7773 (fax) Yazaki North America Trade Payable $5,552,352 6801 Haggerty Road Canton, MI 48187 Attn: Kelly Shaw (734) 983-4876 (734) 983.4877 (fax) MST Steel Corporation Trade Payable $5,399,459 24417 Groesbeck Highway Warren, MI 48089 National Material Company Trade Payable $5,368,003 4506 West Cline Ave. East Chicago, IN 46312 Weldmation, Inc. Trade Payable $5,215,287 31720 Stephenson Highway Madison Heights, MI 48071 Attn: James Rogers (248) 585-0010 (248) 585-0016 (fax) TRW Automotive Trade Payable $4,796,661 34201 Van Dyke PO Box 8008 Sterling Heights, MI 48311 Attn: Joe Bloomingburg (586) 977-5497 Siemens Automotive Trade Payable $4,519,011 2400 Executive Hills Blvd. Auburn Hills, MI 48326 Attn: David Monaghan (248) 764-6538 (248) 764-7151 (fax) Visteon Trade Payable $4,449,674 19540 Allen Road Norwood Building Melvindale, MI 48122 Arvin Meritor TD Center Trade Payable $3,961,233 2020 15th Street Columbus, IN 47201 (877) 832-3687 (812) 378-1591 (fax) Lemforder Corporation Trade Payable $3,793,370 15811 Centennial Drive Northville, MI 48167 Fuji Technica Inc. Trade Payable $3,459,739 20-Matoba Shimizo-Cho Sunto-Gun Shizuoka-Ken 411-0915 Republic of Korea GKN Automotive Trade Payable $2,747,072 3300 University Drive Auburn Hills, MI 48326 Vuteq Engineering Corp. Trade Payable $2,534,605 100 Carley Drive Georgetown, KY 40324 Attn: Ryuta Miyoshi (502) 863-6377 (502) 863-2355 (fax) Trim Trends Co. LLC Trade Payable $2,449,441 30665 Northwestern Hwy Suite 160 Farmington Hills, MI 48334 (248) 626-4300 Olympic Steel Trade Payable $2,274,782 Lafayette Steel Subsidiary 3600 North Military Detroit, MI 48210 Attn: Dena Sokolowski (800) 690-6638 (313) 894-7930 (fax) Utica Enterprises Trade Payable $1,969,164 13231 23 Mile Road Shelby Township, MI 48315 Ohio Valley Manufacturing Trade Payable $1,811,815 1501 Harrington Memorial Rd. Mansfield, OH 44903 Attn: Jeff Fanello (419) 522-5818 (419) 522-6332 (fax) Superior Ind. International Trade Payable $1,731,281 424 Industrial Park Road Herber Springs, AK 72543 Attn: Glenn Carlton (501) 362-9500 (501) 362-9557 (fax) Thiel Tool & Engineering Co. Trade Payable $1,532,995 4622 Bulwer Avenue P.O. Box 470397 St. Louis, MO 63147 Attn: Pat Viviano (314) 241-6121 (314) 241-2954 (fax) Mercury Products Inc. Trade Payable $1,466,273 1201 S. Mercury Drive Schaumburg, IL 60193 (847) 524-4400 (847) 524-8225 (fax) ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Tower Automotive, Inc., and its debtor-affiliates have commenced their Chapter 11 Cases in order to facilitate a balance sheet restructuring. By de-leveraging their balance sheet and addressing operational issues as necessary, the Debtors expect to use their Chapter 11 Cases to return to profitability and to put themselves in a position to grow for the future. James H.M. Sprayregen, Esq., at Kirkland & Ellis LLP, in New York, tells the Court that the Debtors' chapter 11 cases should be jointly administered, for procedural purposes only, under the case number assigned to Tower Automotive, Inc. "Many of the motions, hearings and orders that will arise in the Chapter 11 Cases will jointly affect each and every Debtor. By jointly administering the Chapter 11 Cases, the Debtors will be able to reduce fees and costs resulting from the administration of these cases and ease the onerous administrative burden of having to file multiple and duplicative documents," Mr. Sprayregen says. Mr. Sprayregen assures the Court that the rights of the Debtors' creditors will not be adversely affected by the joint administration of the Chapter 11 Cases because the Debtors only request administrative, not substantive, consolidation of their estates. For example, any creditor may still file a claim against a particular Debtor or its estate, or multiple Debtors and their estates. Thus, all of the Debtors' creditors will benefit from the reduced costs as a result of joint administration. The Court also will be relieved of the burden of entering duplicative orders and maintaining duplicative files. Moreover, supervision of the administrative aspects of the Chapter 11 Cases by the Office of the United States Trustee will be simplified. By this motion, the Debtors ask the Court to modify the caption of their Chapter 11 Cases to reflect the joint administration of those cases: UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ___________________________________ ) In re ) Chapter 11 ) TOWER AUTOMOTIVE, INC., et al., ) Case No. 05-10578 ) Jointly Administered Debtors. ) ___________________________________) The Debtors also request that a docket entry be made in each of their cases substantially as follows: "An order has been entered in accordance with Rule 1015(b) of the Federal Rules of Bankruptcy Procedure directing the joint administration of Tower Automotive, Inc.; Algoods, USA, Inc.; R.J. Tower Corporation; Tower Automotive Bardstown, Inc.; Tower Automotive Bowling Green, LLC; Tower Automotive Chicago, LLC; Tower Automotive Finance, Inc.; Tower Automotive Granite City, LLC; Tower Automotive Granite City Services, LLC; Tower Automotive International, Inc.; Tower Automotive International Holdings, Inc.; Tower Automotive International Yorozu Holdings, Inc.; Tower Automotive Lansing, LLC; Tower Automotive Madison, LLC; Tower Automotive Michigan, LLC; Tower Automotive Milwaukee, LLC; Tower Automotive Plymouth, Inc.; Tower Automotive Products Company, Inc.; Tower Automotive Receivables Company, Inc.; Tower Automotive Services and Technology, LLC; Tower Automotive, s.r.o.; Tower Automotive Technology, Inc.; Tower Automotive Technology Products, Inc.; Tower Automotive Tool, LLC; Tower Services, Inc.; and Trylon Corporation. The docket in Case No. __________ should be consulted for all matters affecting the above listed cases." Any creditor filing a proof of claim against any of the Debtors or their estates must file that proof of claim in the particular bankruptcy case of the Debtor against whom that claim is asserted, and not in the jointly administered case. ----------------------------------------------------------------- [00007] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- Prior to the Petition Date, the Debtors borrowed money on a secured basis under these three agreements: -- Credit Agreement, dated as of May 24, 2004, among R.J. Tower Corporation, Silver Point Capital Fund LP, as successor agent to Morgan Stanley Senior Funding, Inc., certain lenders and certain letter of credit issuing banks; -- First Lien Pledge and Security Agreement, dated as of May 24, 2004, between R.J. Tower and Standard Federal Bank on behalf of certain Pre-Petition Secured Lenders; and -- Second Lien Pledge and Security Agreement, dated as of May 24, 2004, between R.J. Tower and Standard Federal Bank on behalf of certain Pre-Petition Secured Lenders. To secure repayment of these obligations, the Debtors granted the Lenders liens and security interests on all of their cash, proceeds, and cash equivalents. Because the Debtors filed for bankruptcy, absent court authority pursuant to 11 U.S.C. Sec. 363(c), the Debtors have no right to use their lenders' cash collateral. "The Debtors have an immediate need to . . . use [their Lenders'] Cash Collateral in order to permit, among other things, the orderly continuation of the operation of their businesses, to maintain business relationships with vendors, suppliers and customers, to make payroll, to make capital expenditures and to satisfy other working capital and operational needs," James Mallak, Tower Automotive's Chief Financial Officer and Treasurer, says. By this motion, the Debtors seek the Court's authority to use cash collateral in which their Pre-Petition Secured Lenders have an interest, and grant adequate protection to their Pre-Petition Secured Lenders with respect to, inter alia, the use of the cash collateral and all use and diminution in the value of the Pre- Petition Collateral. Specifically, the Debtors propose to grant adequate protection liens and a superpriority claim immediately junior to the claims of postpetition lenders. The Debtors will also pay cash for all accrued and unpaid interest on their prepetition debt and letter of credit fees. The Debtors also seek the Court's permission to enter into a commitment letter with Silver Point Finance, LLC, with respect to the priming of the Second Lien Lenders. A full-text copy of the Commitment Letter is available at no charge at: http://bankrupt.com/misc/silverpointletter.pdf Finding that the Debtors have an urgent need for fresh working capital financing to fund their day-to-day operating expenses, Judge Gropper entered an Interim Cash Collateral Order authorizing the Debtors to use cash collateral securing repayment of the prepetition loans through the conclusion of a Final DIP Financing Hearing scheduled for Feb. 28, 2005. ----------------------------------------------------------------- [00008] DEBTORS' MOTION TO OBTAIN $725,000,000 OF DIP FINANCING ----------------------------------------------------------------- According to James Mallak, Tower Automotive, Inc.'s Chief Financial Officer and Treasurer, the Debtors do not have sufficiently reliable liquidity sources available to ensure continued operations. The Debtors need to obtain financing to sustain their ongoing business operations as quickly as possible. Prior to the Petition Date, the Debtors contacted five potential lenders, including JPMorgan Chase Bank, N.A., with respect to postpetition financing, and received proposals from four of these lenders. The Debtors determined that the proposal of JPMorgan was, under the circumstances, the most favorable and addressed the Debtors' working capital and liquidity needs, while being acceptable to the Debtors' Pre-Petition Secured Lenders. JPMorgan's proposal provides the Debtors with funding needed to operate and maintain their businesses and to pay necessary expenses during the pendency of their Chapter 11 Cases. Accordingly, in their sound business judgment, the Debtors ultimately decided to accept JPMorgan's proposal for postpetition financing. Mr. Mallak tells the Court that the Debtors and JPMorgan engaged in good faith and extensive arm's-length negotiations that culminated in an agreement to provide the Debtors up to $725,000,000 of secured postpetition financing, on the terms and subject to the conditions set forth in that certain Revolving Credit, Term Loan and Guaranty Agreement, and among R.J. Tower Corporation, as Borrower, Tower Automotive, Inc., and the domestic subsidiaries of R.J. Tower party to the DIP Credit Agreement, as Guarantors, JPMorgan, as administrative agent, and a syndicate of lenders. A full-text copy of the DIP Credit Agreement is available at no charge at: http://bankrupt.com/misc/towerdipfacility.pdf By this motion, the Debtors seek the Court's authority to: (a) obtain secured postpetition financing, pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code, up to the aggregate principal amount of $725 million comprised of: -- a $300 million revolving credit facility, of which a portion not in excess of $100 million will be available for the issuance of letters of credit, and -- a $425 million term loan; and (b) execute and enter into the DIP Credit Agreement. Borrowings under the Revolving Facility are limited to the sum of (i) the Debtors' unsold accounts receivable, (ii) inventory and (iii) $150,000,000 on account of machinery and equipment. The $425,000,000 term loan will be drawn in full to refinance loans outstanding as of the Petition Date under the Credit Agreement, dated as of May 24, 2004, between R.J. Tower and the Pre-Petition Secured Lenders. The DIP facility matures when a plan of reorganization is substantially consummated, but no later than February 2, 2007. The Debtors will pay the DIP Lenders an annual commitment fee equal to 0.05% on every dollar not borrowed. The Debtors will pay the DIP Lenders annual fees equal to 2.75% of the face amount of any letter of credit issued under the DIP Facility plus customary L/C fees. The Debtors also ask the Court to grant superpriority claims to the DIP Lenders payable from, and having recourse to, all of the property of the Debtors' estates and all proceeds, subject to a Carve-Out. The DIP Lenders agree to a $7,000,000 carve-out from their liens to allow the Debtors to pay their professionals, any professionals retained by an official committee and fees payable to the United States Trustee. The DIP Lenders agree to an additional $50,000 carve-out from their lien in the event the cases convert to a chapter 7 liquidation to permit payments to the chapter 7 trustee's professionals. The Credit Agreement will be amended to include: * limitations on the amount Debtors can spend on capital expenditures; * minimum EBITDA covenants for the Debtors Domestic and Global units; and * a limit on the amount the Debtors' may disburse to Critical Vendors and Service Providers to satisfy their prepetition claims. Finding that the Debtors have an urgent need for fresh working capital financing to fund their day-to-day operating expenses, Judge Gropper entered an Interim Cash Collateral Order authorizing the Debtors to borrow up to $125 million from the DIP Lenders. Tower will return to Court on Feb. 28, 2005, for a Final DIP Financing Hearing at which time they will ask Judge Gropper for authority to roll the prepetition bank debt into the DIP Facility and borrow up to the full amount available under the DIP Financing Agreement. *** End of Issue No. 1 ***