Delphi agrees on amendments with GM, investors; committees drop plan support

By Caroline Salls

Pittsburgh, Nov. 15 - Delphi Corp. has reached an agreement with General Motors Corp. and its Appaloosa Management LP-led plan of reorganization investors on amendments to the plan, global settlement and master restructuring agreement that include a $1.9 billion reduction in net funded debt, according to a Delphi news release.

Delphi said these latest amendments reflect current market conditions, changes to the company's emergence capital structure and form of plan currency contemplated for stakeholder distributions, an effective reduction of less than 5% in plan value to reflect macroeconomic and industry conditions and uncertainties and reductions in stakeholder distributions to some junior creditors and interest holders.

In addition, the amendments include changes required by the plan investors to obtain their endorsement of the plan, the company's settlements with GM and its U.S. labor unions, the company's emergence business plan and related agreements.

According to the release, Appaloosa and all of the other plan investors have delivered a fully executed bid letter to Delphi in connection with the investment agreement amendment. Execution of the amendments is subject to Appaloosa's approval of any related changes to Delphi's disclosure statement.

"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," Delphi president and chief restructuring officer John Sheehan said in the release.

"We have agreed to very focused potential amendments to our reorganization plan which continues to provide for full recoveries for unsecured creditors at plan value as well as fair consideration for Delphi's equity holders."

Committee opposition

Although GM and the plan investors have agreed to the amendments, Delphi said its official committee of unsecured creditors and official committee of equity holders said they will no longer support a plan of reorganization that includes the proposed amendments.

According to the release, the creditors' committee is opposed to the proposed increase in consideration to the plan investors as a result of the larger discounts to equity value that Delphi agreed to in exchange for the investment, as well as the form of distributions to GM and proposed addition of out-of-the-money warrants to common stockholders.

Meanwhile, the equity committee is objecting to changes that would reduce recoveries to common stockholders.

Delphi said it will work with the committees to resolve the disputes. If the proposed amendments do not take effect, the company said the original underlying agreements will still remain in effect.

The company said it still hopes to emerge from bankruptcy in the first quarter of 2008.

Proposed changes

Changes to the investment agreement and creditor recoveries will include:

• A reduction in net funded debt to $5.2 billion from $7.1 billion;

• A reduction in total enterprise value to $13.4 billion from $13.9 billion, which, after deducting net debt and warrant value will result in $8.1 billion in distributable equity value, or $61.72 per share based on 131.3 million shares.

Previously, the distributable equity was $6.6 billion, or $45 per share based on 147.6 million shares;

• The plan investors will purchase $400 million of preferred stock convertible at an assumed enterprise value of $10.25 billion, or 37.8% discount from plan equity value, compared with a previous assumed enterprise value of $11.75 billion, or 30.1% discount;

• The plan investors will purchase $400 million of preferred stock convertible at an assumed enterprise value of $10.75 billion, or a 31.6% discount, compared with a previous assumed enterprise value of $12.80 billion, or a 14.3% discount from plan equity value;

• The plan investors will purchase $175 million of new common stock at an assumed enterprise value of $10.25 billion, or a 37.8% discount, compared with a previous assumed enterprise value of $12.80 billion, or a 14.3% discount;

• GM will recover $2.6 billion at a plan value of $2.7 billion, including at least $750 million in cash, up to $750 million in a second-lien note and $1.1 billion in junior convertible preferred stock at plan value of $13.4 billion.

GM was previously slated to recover $2.7 billion in cash;

• Unsecured creditors and TOPrS creditors will receive par plus accrued recovery at a $13.4 billion plan value, reduced from a $13.9 billion plan value. These creditors will receive 75.5% through new common stock and 24.5% through participation in a discount rights offering at an assumed enterprise value of $10.25 billion.

Previously, these creditors were slated to receive 80% recovery in cash and 20% in new common stock;

• Existing stockholders will receive the right to buy 20.77 million shares of new common stock at a purchase price struck at plan equity value, plus warrants to acquire an additional 6.1 million shares exercisable for five years after Delphi's emergence from bankruptcy, struck at a 32.4% premium to plan equity value. Existing stockholders will also receive warrants to buy $1 billion of new common stock exercisable for six months from emergence, struck at an 8.2% premium to plan equity value.

Previously, existing equity holders were scheduled to receive the right to buy 12.71 million shares, plus warrants for an additional 5% of new common stock exercisable for five years from emergence; and

• Provisions for a direct distribution of 1.48 million shares to existing stockholders and participation in a 40.85 million share discount rights offering have been eliminated under the amendments.

Delphi, a Troy, Mich.-based 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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