Delphi's equity holders blast disclosure statement for unfair treatment, ask court to postpone disclosure hearing

By Reshmi Basu

New York, Nov. 2 - Delphi Corp.'s official committee of equity security holders objected to the company's disclosure statement and its proposed amendments, arguing that equity holders are getting the raw end of the deal, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

In addition, the committee blasted the disclosure statement for lacking adequate information necessary for creditors to make informed decisions regarding the company's plan of reorganization.

In its objection, the committee said the new plan "dramatically changes the fundamental financial underpinnings" of the previous consensual plan, which was filed with the court on Sept. 6, and that the latest plan is "virtually unrecognizable."

Also according to the equity committee, the new plan reflects an unfair re-trade, which has resulted in certain parties "demanding more value for themselves, at the expense of existing equity."

Moreover, the equity committee said it was locked out of the critical negotiation sessions at which the plan was devised and was only invited back to the table "after existing equity's recoveries had already been gutted."

The committee also criticized Delphi for bowing down to the demands of unsecured creditors and thereby stripping away value from equity holders.

The equity holders said the new plan, which was filed on Oct. 31, was improper because it replaced equity holders' previously agreed to recoveries by allowing unsecured creditors to take part in a discount equity offering, which was intended to give value to existing equity holders.

The committee added that Delphi should not have permitted the group of investors led by Appaloosa Management, LP to renegotiate their contractual commitment to invest in the reorganized company, "effectively creating a windfall of value for their investment."

Among other criticisms, the equity holders said the disclosure statement does not provide adequate information about the potential recoveries relating to claims against General Motors Corp, nor does it explain why unsecured creditors should be rewarded with post-petition interest.

In addition, the committee said the company does not justify why the plan calls for substantive consolidation.

New hearing date

In another motion filed Friday, the equity holders asked for an adjournment of the Nov. 8 hearing for the approval of the company's disclosure statement.

The committee argued that because the plan is completely different from the previous consensual plan, Delphi should not be allowed to ask the court to approve the plan without affording all interested parties the due process required by the bankruptcy code.

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

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