Delphi looks to extend pension plan funding deadline to avoid $1.4 billion of tax penalties

By Caroline Salls

Pittsburgh, May 14 - Delphi Corp. requested court approval of an extension for its pension plan minimum funding requirement deadline for the plan year ended Sept. 30, 2006, to after it emerges from bankruptcy from June 15, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the company is seeking court approval of an hourly pension plan waiver and a salaried pension plan waiver, both from the Internal Revenue Service.

The hourly plan waiver will be used to transfer some of the hourly pension plan obligations to General Motors Corp. in accordance with Delphi's plan of reorganization framework support agreement.

In order to make the transfer economically feasible for the company, Northwest said it must secure the June 15 funding deadline.

The company said the extension will also help it avoid $1.4 billion in excise tax penalties that would potentially be imposed in connection with both plans if Northwest missed the funding deadline.

In exchange for the waivers, Delphi will make a $10 million accelerated contribution to the hourly plan upon its emergence from Chapter 11, and this contribution can be credited toward any required contributions for the plan year ending Sept. 30.

The waivers are subject to conditions that require Delphi to file a Chapter 11 plan by July 31 and to satisfy any minimum funding requirements by the effective date of a plan of reorganization, which cannot be later than Nov. 15.

In addition, Delphi must provide the Pension Benefit Guaranty Corp. with $100 million in letters of credit on account of its hourly pension plan and $50 million on account of its salaried pension plan as payment security by no later than June 15.

Delphi said it intends to honor its pension obligations and, therefore, does not expect the letters of credit to ever be drawn down by the PBGC.

A hearing is scheduled for May 31.

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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