Delphi closes on DIP loan accommodation, default interest rate, freeze on draws triggered

By Caroline Salls

Pittsburgh, Dec. 12 - Delphi Corp. satisfied the closing conditions Friday for the accommodation agreement that allows the company to continue to use debtor-in-possession facility proceeds beyond the Dec. 31 maturity date, according to an 8-K filed with the Securities and Exchange Commission.

As previously reported, the company filed a motion on Nov. 7 seeking authority to enter into an accommodation agreement, under which the administrative agent under the facility and the required majority of holders of tranche A and tranche B commitments would agree to allow Delphi to continue using the proceeds of the DIP, to the extent already drawn prior to Dec. 31, until June 30, 2009.

As a condition to the accommodation agreement, Delphi is required to give notice of a default under its amended and restated DIP facility.

In addition, the company is no longer able to make additional draws under the facility, and applicable interest rates on amounts drawn have increased by 200 basis points.

Before the accommodation agreement took effect, Delphi replaced or cash collateralized, at 105% of the undrawn amount of the DIP facility, the $81 million of outstanding letters of credit that had not been collateralized before Dec. 12.

The total principal amounts outstanding under tranche A DIP facility borrowings were limited to no more than $377 million.

As of Dec. 12, the company said there was $370 million outstanding under tranche A, $500 million outstanding under the tranche B DIP facility term loan and $2.75 billion outstanding under the tranche C term loan.

Delphi also agreed to provide up to $200 million of cash collateral that was pledged to the DIP administrative agent for the benefit of the lenders.

Upon the company's request, some or all of the borrowing base cash collateral will be transferred back to Delphi provided that the company is in compliance with the borrowing base calculation contained in the accommodation agreement and no event of default has occurred.

In addition to the increase in interest rate, Delphi said the DIP lenders received a pledge of 100% of the equity interests in the company's first-tier foreign subsidiaries as additional collateral, as compared to 65% of the equity interests before the accommodation took effect.

The company has also paid roughly $37 million in fees to the consenting lenders in connection with the accommodation agreement.

According to the 8-K, Delphi's advance and partial temporary accelerated payments agreements with General Motors Corp. also took effect on Dec. 12.

Delphi, a Troy, Mich., automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-44481.

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