Delphi Retools Reorganization Plan

Investors, GM, unsecured creditors, and common stockholders all will get a little bit less to help the company out of bankruptcy.
Stephen TaubOctober 30, 2007

Delphi Corp. has filed a number of amendments to its reorganization plan, including changes to its agreements with General Motors and investors, as a result of the turmoil in the credit markets.

The amendments spell out a $2 billion reduction in debt when the auto parts maker emerges from bankruptcy.

“These very focused potential amendments reflect current market conditions, commensurate changes to our proposed emergence capital structure and form of plan currency contemplated for stakeholder distributions, and an effective reduction of less than 5 percent in plan value to reflect macroeconomic and industry conditions and uncertainties,” said John Sheehan, Delphi vice president and chief restructuring officer.

Plan investors, led by Appaloosa Management L.P., will still purchase $800 million in convertible preferred stock and $175 million in new common stock. However, both investments reflect a lower assumed enterprise value.

General Motors will still recover $2.7 billion. However, instead of receiving all cash, it will get $750 million in cash, $750 million in a second-lien note, and $1.2 billion in junior convertible preferred stock.

Recovery for unsecured creditors was reduced to $13 billion from $13.9 billion, but they will get more common stock valued at a lower price and participation in a rights offering, rather than 80 percent common stock and 20 percent cash.

However, existing common stockholders will no longer be able to participate in the rights offering. The stockholders will still receive about 12.7 million shares, but at a lower purchase price. The arrangement regarding the warrants they will receive also was altered.

Delphi, which filed for bankruptcy on Oct. 8, 2005, plans to present the package in bankruptcy court on November 8. Its stock fell more than 38 percent in value on the news, to 20 cents per share.