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The bankrupt auto-parts maker also expects to transfer at least $1.5 billion of unfunded liabilities to a plan sponsored by its former parent, General Motors.
Stephen Taub, CFO.com | US
May 7, 2007
Delphi announced that it expects to contribute $1.3 billion to its pension plan when it emerges from bankruptcy after transferring at least $1.5 billion of unfunded liabilities to a plan sponsored by its former parent, General Motors.
The funding plan, worked out with the Internal Revenue Service and the Pension Benefit Guaranty Corp., would enable the bankrupt auto-parts maker to satisfy its pension-funding obligations when it emerges from Chapter 11, the company added in a regulatory filing.
On March 9, according to Delphi, it received IRS approval to use fair market value as its asset valuation method for funding purposes, for plan years beginning October 1, 2005.
In addition, the filing continued, on May 1 the company received conditional funding waivers from the IRS for the plan year ended September 30, 2006. The waivers permit the company to defer contributions that would have been due on June 15 until after Delphi emerges from Chapter 11.
Once Delphi emerges from bankruptcy protection, it will be required to make sufficient cash contributions to the plan to satisfy funding minimums under the Employee Retirement Income Security Act (after the transfer of liabilities to the GM plan), to satisfy specific funding requirements, and to attain a specific funding level thereafter.
To secure the waivers, Delphi will provide to the PBGC two letters of credit in favor of the plans: $100 million toward its hourly plan and $50 million toward its salaried plan. The letters of credit will expire once Delphi satisfies its contribution requirements upon exiting bankruptcy.
At that time, Delphi will also be required to make cash contributions of at least $20 million to the hourly plan for the year ending September 30, 2007, which will settle all potential claims by the IRS for excise taxes related to funding deficiencies carried over from the plan year ending September 30, 2005.
The funding waivers also are conditioned upon Delphi's filing a reorganization plan no later than July 31 and emerging from bankruptcy no later than November 15.
The hourly plan funding waiver is further conditioned on Delphi's making contributions to the plan by June 15, 2008, sufficient to meet ERISA minimums for the plan year ending September 30, 2007.