Delphi further reduces enterprise value under latest set of plan and investor agreement amendments

By Caroline Salls

Pittsburgh, Dec. 4 - Delphi Corp. and its official committee of unsecured creditors, official committee of equity security holders, General Motors Corp. and its plan investors have agreed in principle to plan and investment agreement amendments that once again reduce the projected enterprise value of the reorganized company, this time to $13.3 billion, according to a company news release.

The amendments also separate the treatment of Delphi Trust I and Delphi Trust II (TOPrS) claims from those of general unsecured creditors, allow post-bankruptcy interest on general unsecured claims and return a direct stock distribution to existing equity holders.

According to a Monday court filing, the plan and investment agreement amendments include:

• General unsecured creditors will recover 100% of their claims, as well as post-bankruptcy interest through the earlier of Jan. 31 or the plan confirmation date;

• Holders of Delphi Trust I and Delphi Trust II (TOPrS) unsecured claims will have a $379 million allowed claim, reduced from $421 million, for a 90% recovery.

Previously, unsecured creditors and TOPrS creditors were both slated to receive 75.5% through new common stock and 24.5% through participation in a discount rights offering;

• In addition to the $2.6 billion in cash, a second-lien note and convertible preferred stock it was already scheduled to receive, GM will also receive releases from holders of claims against Delphi and holders of existing Delphi common stock;

• Holders of existing common stock will receive a direct distribution of 469,720 shares of new common stock, subscription rights to purchase 21.68 million shares of new common stock, up from 20.77 million shares, through a par value rights offering at $59.61 per share and six-month warrants at a 9% premium, seven-year warrants at a 20.7% premium, down from a 32.4% premium, and 10-year warrants exercisable at plan equity value.

Previously, existing stockholders were to 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 shares exercisable for five years after Delphi's emergence from bankruptcy, as well as warrants to buy new common stock exercisable for six months from emergence, with no direct distribution planned;

• Proceeds from the six-month warrants will go first to redeem any shares of series C new preferred stock distributed to GM, second to redeem the GM note and third to be used by Delphi for general corporate purposes. Meanwhile, all proceeds of the seven-year and 10-year warrants will be used for general corporate purposes;

• The total enterprise value of the reorganized company will range from $11.2 billion to $14.1 billion, with a midpoint value of $12.7 billion. However, the company, GM, the plan investors and the creditors' committee have agreed to a $13.3 billion assumed enterprise value. The enterprise value was previously set at $13.4 billion;

• After deducting net debt and warrant value, the enterprise value will result in a $7.8 billion distributable equity value, down from $8.1 billion, or $59.61 per share based on 131.27 million shares, down from $61.72 based on 131.3 million shares; and

• A total of 40.03 million shares of new common stock available through a discount rights offering to holders of general unsecured claims and litigation claimants will be purchased at a 35.6% discount to plan equity value; series A senior convertible preferred stock will be sold to the plan investors at a 29.2% discount, down from 31.6%; and shares of series B convertible preferred shares will be sold to plan investors at a 28.6% discount, down from 37.8%.

Remaining opposition

Delphi said other objections not covered in the plan amendments have been raised by the creditors' committee, equity committee, informal trade creditor committee, informal bondholders' group and two indenture trustees, but the company feels those objections are not valid.

The remaining issues include whether treatment of TOPrS claims can differ from general unsecured claim treatment; whether post-bankruptcy interest should be paid on disputed claims; whether the treatment of junior creditors and interest holders is fair; and whether the proposed substantive consolidation of the debtors is legal.

The disclosure statement hearing is scheduled for Dec. 6.

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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