DELPHI: Company revising plan to emerge from bankruptcy

Business

August 29, 2008

Anonymous The Lockport Union-Sun %26 Journal Fri Aug 29, 2008, 10:00 PM EDT

By VINNEE TONG

The Associated Press

NEW YORK — Auto parts supplier Delphi, which has been operating under bankruptcy protection for nearly three years, is working on a revision to its reorganization plan and is not talking about liquidating the company, a spokesman said Friday.

“We are working on revisions to the plan of reorganization that would let the company successfully emerge,” Delphi spokesman Lindsey Williams said.

He said the Troy, Mich.-based company is in discussions with GM, its creditors and other stakeholders to revise the plan, but he would not say whether it includes the participation of equity investors.

Delphi Corp.’s previous plan included a group of equity investors that had planned to inject as much as $2.55 billion into the reorganized company. The group, led by hedge fund Appaloosa Management LP, backed out of the deal in April. That led Delphi to pursue a contentious fraud lawsuit against the group.

One of Delphi’s looming problems is a Sept. 30 deadline to transfer $1.5 billion in pension obligations to its former parent, General Motors Corp.

GM had expected to take on the obligation when Delphi left court protection under the reorganization plan that included the investors. That was on track to happen before the deadline until Appaloosa balked.

The Pension Benefit Guaranty Corp., the government agency that insures pension plans, warned Delphi in an Aug. 14 letter that if it did not complete the transfer in time and the pension plans fail, the PBGC would have a claim for as much as $8 billion dollars, diluting the interests of Delphi’s creditors.

“Our point all along has been that everyone realizes that liquidation doesn’t serve the workers or the creditors of Delphi. And in liquidation, the PBGC’s claim would swamp most other creditors,” PBGC Director Charles Millard said Friday in a statement to The Associated Press. “We want to make sure that Delphi and its pension plans remain intact. The best way to avoid liquidation is for GM to take Delphi’s pension liabilities, and that’s why we have been advocating so forcefully for that result.”

Delphi’s and GM’s intertwined interests have complicated the parts supplier’s bankruptcy case, which it first filed in October 2005. Its emergence from Chapter 11 has been repeatedly delayed as the company negotiated with unions on worker buyouts, reached the deal with Appaloosa, then ran into trouble securing $6.1 billion in loans it needed to emerge from court protection under that plan.

When Delphi struggled to secure the loans in a tight credit market, GM offered to increase the amount it would lend. That drew opposition from Appaloosa, which felt such a deal would diminish its power over the reorganized company.

A revised plan could mean the sale of core assets.

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