Stakeholders Take Sides on Delphi Exit Plan

The auto parts maker eyes an escape from bankruptcy with $5.2 billion in financing, but the fate of the reorganization plan is still very much up i...
Stephen TaubNovember 15, 2007

Delphi Corp. announced that its former parent, General Motors, and an investor group led by Appaloosa Management LP have agreed to the company’s revised reorganization plan.

At the same time, though, Delphi acknowledged that both its creditors’ committee and its equity committee oppose elements of the revised reorganization plan. In court filings on Wednesday, two creditor groups expressed concern that Delphi is “pushing forward with an exit-financing plan in spite of uncertainty surrounding its reorganization plan and its $2.55 billion equity-investment pact with Appaloosa,” the Associated Press reported.

The updated plan, Delphi said, reflects changes to the company’s emergence capital structure and the form of plan currency for stakeholder distributions; an effective reduction of nearly 5 percent in plan value to reflect macroeconomic and industry conditions; and reductions in stakeholder distributions to some junior creditors and interest holders.

The auto parts company said the plan may be further amended on Nov. 28.

“Today’s filings, which have been agreed upon by GM and all of our Plan Investors, are the cornerstones of a plan of reorganization that we believe can be achieved during this challenging capital markets environment,” said John Sheehan, Delphi vice president and chief restructuring officer.

Under the revised plan, Delphi’s net funded debt would be reduced to $5.2 billion from $7.1 billion under the original plan dated September 6. In addition, the plan’s total enterprise value has been reduced by $500 million, to $13.4 billion. However, Delphi has raised the distributable equity to $8.1 billion from $6.6 billion.

As a result, GM’s recovery was cut to $2.6 billion from $2.7 billion. And instead of all cash, GM will receive $750 million in cash, up to $750 million in a second lien note, and $1.1 billion in junior convertible preferred stock.

Plan investors, meanwhile, will still invest the same amount of money, but their equity value will be reduced from 80 percent to 75.5 percent due to the lower enterprise value.

Delphi, which filed for Chapter 11 on Oct. 8, 2005, said it hopes to seek approval of the reorganization plan during the first quarter of 2008.