Delphi looks to enter asset purchase and lease agreement to consolidate office and technical sites

By Caroline Salls

Pittsburgh, March 5 - Delphi Corp. requested court approval of an asset purchase and lease agreement that will allow it to consolidate multiple office and technical sites in Michigan and Illinois into one new location in Michigan, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the goals behind the consolidation are to reduce operating costs and create a single technical center in close proximity to the company's major customers.

Delphi said it found a property that will meet its needs and negotiated the agreement, under which the property will be purchased by third-party investor Metcalf Family Trust for $33 million and leased to Delphi Automotive Systems LLC.

For five months after closing of the sale, current property owner Valeo Electrical Systems, Inc. will sublease a portion of the property from Delphi Automotive Systems while Valeo prepares to leave the building.

As security for payment of the rent due under the sublease, which could total $780,250, Valeo will deposit $880,250 into escrow, and the sublease rent payments will then be periodically disbursed from the escrow account.

The sale closing is expected to occur on April 30.

If the lease transaction is terminated, Delphi Automotive will pay Metcalf up to $50,000 for expenses.

The lease provides for an initial term of 10 years, with two optional additional terms of five years each.

The monthly base rental for the initial 10-year term is $268,125 per year.

Under the terms of the lease, Delphi Automotive will also be responsible for all operating expenses and real estate taxes.

As a result, Delphi said the effective cost per square foot, including base rent and operating costs, is $19.98 for the first year.

A hearing is scheduled for March 22.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.