Note 12. Financing Agreements

Senior notes — In January 2011, we completed the sale of $400 in senior unsecured notes at 6.50%, due February 15, 2019 (the 2019 Notes) and $350 in senior unsecured notes at 6.75%, due February 15, 2021 (the 2021 Notes) (collectively, the Senior Notes). Interest on the notes is payable on February 15 and August 15 of each year beginning on August 15, 2011. Net proceeds of the offerings totaled approximately $733, net of financing costs of $17. The financing costs were recorded as deferred costs and will be amortized to interest expense over the life of the Senior Notes. The net proceeds, plus cash and cash equivalents on hand of $127 (net of amounts paid to a Dana subsidiary), were used to repay all amounts outstanding under our then existing Term Facility. In connection with the sale of the Senior Notes, we wrote off $51 of previously deferred financing costs and original issue discount (OID) to other income, net.

At any time on or after February 15, 2015, we may redeem some or all of the Senior Notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on February 15 of the years set forth below:

	Redemption Price
Year	2019 Notes			2021 Notes
2015		103.250	%
2016		101.625	%		103.375	%
2017		100.000	%		102.250	%
2018		100.000	%		101.125	%
2019 and thereafter		100.000	%		100.000	%

Prior to February 15, 2015 for the 2019 Notes and prior to February 15, 2016 for the 2021 Notes, during any 12-month period, we may at our option redeem up to 10% of the aggregate principal amount of the notes at a redemption price equal to 103% of the principal amount, plus accrued and unpaid interest. Prior to these dates, we may also redeem some or all of the notes at a redemption price equal to the aggregate principal amount, plus accrued and unpaid interest, plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt. At any time prior to February 15, 2014 for the 2019 Notes and February 15, 2015 for the 2021 Notes, we may redeem up to 35% of the aggregate principal amount of the notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 106.5% (2019 Notes) and 106.75% (2021 Notes) of the principal amount, plus accrued and unpaid interest, provided that at least 65% of the original aggregate principal amount of the notes issued remains outstanding after the redemption.

Revolving facility — In order to complete the refinancing of our term debt in January 2011, we entered into a second amendment (the Amendment) to our Revolving Credit and Guaranty Agreement (the Revolving Facility). The Amendment permitted, among other things, repayment in full of all amounts outstanding under our then existing term debt using the net proceeds from the issuance of the Senior Notes and our current cash and cash equivalents. Following the issuance of the Senior Notes, we received commitments from new and existing lenders for a $500 amended and extended revolving credit facility (the New Revolving Facility). The New Revolving Facility extends the maturity of the revolving facility to five years from the date of execution in February 2011 and reduces the aggregate principal amount of the facility from $650 to $500. In connection with amending the revolving facility, we paid financing costs of $6 which were recorded in the first quarter of 2011 as deferred costs and will be amortized to interest expense over the life of the New Revolving Facility. We wrote off $2 of previously deferred financing costs to other income, net.

The New Revolving Facility is guaranteed by all of our domestic subsidiaries except for Dana Credit Corporation and Dana Companies, LLC and their respective subsidiaries (the guarantors) and grants a first priority lien on Dana’s and the guarantors’ accounts receivable and inventory and a second priority lien on substantially all of Dana’s and the guarantors’ remaining assets, including a pledge of 65% of the stock of our material foreign subsidiaries.

The New Revolving Facility bears interest at a floating rate based on, at our option, the base rate or London Interbank Offered Rate (LIBOR) (each as described in the New Revolving Facility) plus a margin based on the undrawn amounts available under the New Revolving Facility as set forth below:

Remaining Borrowing Availability	Base Rate			LIBOR Rate
Greater than $350		1.50	%		2.50	%
Greater than $150 but less than or equal to $350		1.75	%		2.75	%
$150 or less		2.00	%		3.00	%

Commitment fees are applied based on the average daily unused portion of the available amounts under the New Revolving Facility. If the average daily use is less than 50%, the applicable fee will be 0.50% per annum. If the average daily unused portion of the New Revolving Facility is equal to or greater than 50%, the applicable fee will be 0.625% per annum. Up to $300 of the New Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable LIBOR margin based on a quarterly average availability under the New Revolving Facility and a per annum fronting fee of 0.25%, payable quarterly.

At December 31, 2011, we had $750 principal amount of Senior Notes outstanding. The weighted-average interest rate on the Senior Notes was 6.62% at December 31, 2011. There were no borrowings under the New Revolving Facility but we had utilized $78 for letters of credit. Based on our borrowing base collateral of $404, we had potential availability at December 31, 2011 under the New Revolving Facility of $326 after deducting the outstanding letters of credit.

European receivables loan facility — In March 2011, we terminated our previous European receivables loan agreements and established a new five-year €75 ($97 at the December 31, 2011 exchange rate) receivables securitization program. Availability under the program is subject to the existence of adequate levels of supporting accounts receivable. As of December 31, 2011, we had potential availability of $91 based on the effective borrowing base. In connection with the new program, we paid financing costs of $3 which were recorded as deferred costs and are being amortized to interest expense over the life of the program. We wrote off previously deferred financing costs of less than $1 on the former agreement to other income, net.

Advances under the program will bear interest based on the LIBOR applicable to the currency in which each advance is denominated or an Alternate Base Rate (as defined). All advances are to be repaid in full by March 2016. We pay a fee on any unused amount of the program, in addition to other customary fees. The program is subject to customary representations and warranties, covenants and events of default. As of December 31, 2011, we had no borrowings under this program.

Debt reduction actions — Prior to refinancing our Term Facility in January 2011, we used proceeds from the sale of the Structural Products business to repay outstanding principal of our Term Facility. A total of $90 and $5 was remitted to our lenders in 2010 and 2011. Approximately $9 of the $90 was received by a Dana subsidiary that had acquired approximately 10% of parent company debt in 2009. In connection with the debt repayments, we wrote off the related OID of $4 to other income, net and we expensed $2 of previously deferred financing costs as interest expense.

In September and October of 2009, we completed a common stock offering for 39 million shares generating net proceeds of $250. We used $113 to repay outstanding principal of our Term Facility held by third parties and the Dana subsidiary holding 10% of parent company debt received $13. We recorded a net loss on extinguishment of debt of $8 which is included in other income, net. We also charged $3 of previously deferred financing costs to interest expense in connection with this reduction in debt.

During the second and third quarters of 2009, we used cash of $86 to reduce the principal amount of our Term Facility borrowings by $138, primarily through market purchases and repayments. The accounting for this activity included a reduction of $9 in the related OID and resulted in the recording of a $43 net gain on extinguishment of debt, which is included in other income, net. Previously deferred financing costs of $3 were written off as a charge to interest expense. During the third quarter of 2010, we prepaid $46 of the term loan debt ($51 less $5 paid to a Dana subsidiary holding about 10% of the term loan debt) and we made a scheduled repayment of $2. In connection with these repayments, we wrote off the related OID of $3 to other income, net and we expensed $1 of previously deferred financing costs as interest expense. In the fourth quarter we made a scheduled repayment of $2.

Debt covenants — At December 31, 2011, we were in compliance with the covenants of our debt agreements. Under the New Revolving Facility and the Senior Notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types.

The incurrence-based covenants in the New Revolving Facility permit us to, among other things, (i) issue foreign subsidiary indebtedness, (ii) incur general secured indebtedness and (iii) incur additional unsecured debt so long as the pro forma minimum fixed charge coverage ratio is at least 1.1:1.0. We may also make dividend payments in respect of our common stock as well as certain investments and acquisitions so long as there is (i) at least $125 of pro forma excess borrowing availability or (ii) at least $75 of pro forma excess borrowing availability and the pro forma minimum fixed charge coverage ratio is at least 1.1:1.0. The indenture governing the Senior Notes includes similar incurrence-based covenants that may subject us to additional specified limitations.

Long-term debt at December 31 —

	2011				2010
	Carrying		Fair		Carrying			Fair
	Value		Value		Value			Value
Senior Notes, 6.50%, due 2019	$	400	$	407	$	—		$	—
Senior Notes, 6.75%, due 2021		350		358
Term Loan Facility, weighted average rate, 4.53%						867			873
Less: original issue discount						(39	)
						828			873
Other indebtedness		105		103		91			85
Total		855		868		919			958
Less: current maturities		24		24		139			139
Total long-term debt	$	831	$	844	$	780		$	819

Other indebtedness includes the embedded lease obligation associated with the accounting for our agreement with SIFCO. See Note 2 for a further discussion of our agreement with SIFCO.

The fair value of our Senior Notes is estimated based upon a market approach while the fair value of our other indebtedness is based upon an income approach (present value technique).

Scheduled principal payments on long-term debt as of December 31, 2011 —

		2012				2013				2014				2015				2016				Thereafter				Total
Debt maturities		$	24			$	60			$	6			$	2			$	2			$	761			$	855