Delphi gets court OK of disclosure statement; confirmation hearing starts Jan. 17

By Reshmi Basu

New York, Dec. 7 - Delphi Corp.'s disclosure statement was approved Friday, which keeps the company on track to exit bankruptcy protection by the end of February.

The confirmation hearing is slated to run from Jan. 17 to Jan. 18.

Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York said he would approve the order as long as Delphi resubmits a version that contains immaterial changes as outlined by the court during Friday's hearing.

Delphi can now begin sending out solicitation packages to about 500,000 creditors for their vote on the company's plan of reorganization, which is predicated on a comprehensive series of settlements, including deals cut with several unions and the company's former parent and biggest customer, General Motors Corp.

"It's time for people in this case to make rational economic choices about their outcomes," said Delphi attorney John William Butler of Skadden, Arps, Slate, Meagher & Flom LLP following the conclusion of the hearing.

"It's time for the company to emerge."

Delphi hopes to exit Chapter 11 no later than Feb. 28.

Drain also approved amendments to an investment plan that calls for the injection of $2.55 billion in cash in exchange for shares in the new company.

Creditor treatment

The plan calls for the following creditor treatment:

• 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 for a 90% recovery.

• In addition to the $2.6 billion in cash, a second-lien note and convertible preferred stock, 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.

• 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, or $59.61 per share based on 131.27 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, and shares of series B convertible preferred shares will be sold to plan investors at a 28.6% discount.

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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