Delphi plan investors terminate equity investment deal; company claims exit financing in place

By Jennifer Lanning Drey

Portland, Ore., April 4 - Delphi Corp.'s plan investors terminated their agreement Friday to make a $2.55 billion equity investment to help the company emerge from bankruptcy, according to a letter sent to the company by lead investor Appaloosa Management.

The investors believe Delphi is obligated to pay them an $82.5 million break-up fee.

Appaloosa's letter included multiple areas where the plan investors said Delphi has breached the provisions of their agreement, including that the company failed to secure the $6.1 billion of exit financing required by the April 4 deadline under the plan.

Delphi claimed in a Friday news release that the company believes it has met the conditions of the investor agreement, including obtaining the required $6.1 billion of exit financing.

The company claimed to have successfully arranged exit facilities from J.P. Morgan Securities, Inc. and Citigroup Global Markets, Inc.

Delphi said representatives for its new exit lenders and General Motors Corp., along with the company and its joint statutory committees were prepared to move forward with the formal closing process on the morning of April 4. However, the investors refused to participate in the closing, Delphi said.

"We are extremely disappointed that our plan investors have taken the position that they are not obligated to fund their plan investment commitments to Delphi and instead have chosen to walk away from the company and its stakeholders," John Sheehan, Delphi's vice president and chief restructuring officer, said in the release.

"We are prepared to pursue actions that are in the best interests of Delphi and its stakeholders."

Investor objections

Alleged breaches of the agreement between Delphi and its investor group that were specified in Friday's termination letter include:

• The company's plans for equity capitalization, which the investors said are dilutive to the investors and other equity holders;

• The company's agreement with General Motors Corp., which they said is inconsistent with the plan;

• The company's failure to use its best efforts to arrange for bank financing and the GM debt on the previously agreed terms and conditions;

• The company's failure to obtain proceeds from the debt financings as contemplated under the agreement and failure to have an asset-backed revolving loan facility described in the financing letter; and

• The company's entrance into employment agreements with senior management that are not acceptable to the investor group.

Appaloosa said in the letter that it would continue to work toward a mutually acceptable alternative transaction with Delphi.

Delphi is a Troy, Mich.-based automotive electronics manufacturer that filed for bankruptcy protection on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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