CHICAGO -- Shares of auto and truck parts maker Dana Corp. fell nearly 45 percent to an all-time low on Thursday, a day after it failed to make bond interest payments, heightening concerns it could file for bankruptcy.
Dana, which is in talks with bank lenders on financing alternatives, said on Wednesday, March 1, that it failed to make $21 million of interest payments on two senior bond issues.
Shares of Dana closed at a low of $1.02, down 83 cents on the New York Stock Exchange, and have dropped more than 85 percent since the start of 2006.
"The announcement dramatically heightens the potential for Dana's filing for Chapter 11 and casts greater doubt on the progress of the company's discussions to renegotiate its bank facilities," Moody's Investors Service said.
A Dana spokesman could not be reached for comment. Dana on Monday, Feb. 27, said it expected a resolution to its financing talks within the next two weeks.
Dana Corp. ranks No. 15 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $9.06 billion in 2004.
Investors have been quick to jump out of U.S. auto parts sector stocks at signs of instability, given bankruptcy filings in 2005 by Delphi Corp., Tower Automotive Inc. and Collins & Aikman Corp.
Shares of most U.S. auto parts makers sank Thursday, likely in reaction to Dana, analysts said. Lear Corp. fell 10.4 percent, Visteon Corp. 9.7 percent, Hayes Lemmerz International Inc. 6.6 percent and Dura Automotive Systems Inc. 6.55 percent.
"We believe investors are justifiably growing increasingly concerned that production disruptions due to labor disputes are increasingly probable as there are currently two suppliers in bankruptcy with another more than likely headed in that direction," Calyon Securities analyst Joseph Amaturo said in a note.
Deutsche Bank analyst Rod Lache cut his price target on Dana to zero, citing increasing risks of bankruptcy. He previously cited a 60 percent probability of bankruptcy.
"We believe that Dana is struggling to obtain secured bank financing and a bank deal may not materialize, or if it does, it may be too small to allow Dana to weather company specific and industry head winds," Lache said in a note.
Moody's and Standard & Poor's on Thursday cut Dana's corporate credit ratings, citing the announcement. Dana has until March 31 to make the payments before bondholders could declare a default.
Dana, a Toledo, Ohio-based axle and drive-shaft maker, has been hurt by industry forces such as declining market share at key North American customers Ford Motor Co. and General Motors as well as company-specific problems.
Dana was forced to restate results back several years because of accounting errors. It posted losses totaling $1.23 billion through the first nine months of 2005 and has yet to file fourth-quarter and full 2005 results.