Delphi equity committee might contest plan changes, wants compensation for GM's 'wrongful conduct'

By Caroline Salls

Pittsburgh, Oct. 16 - Delphi Corp.'s official committee of equity security holders said Thursday that the company has not yet addressed the concerns of the constituents most harmed by General Motors Corp.'s "wrongful conduct" that occurred before, during and after GM's spinoff of Delphi in 1999, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

Absent what it called necessary changes, the equity committee said it intends to contest the company's modified plan of reorganization and disclosure statement.

The equity committee also reserved the right to object to any future requests to extend Delphi's exclusive periods to file and solicit acceptances of a Chapter 11 plan.

The committee said the company is trying to use the momentum of the court's approval of Delphi's GM settlement as an accelerant to emerge from Chapter 11 bankruptcy without addressing the infirmities of its proposed plan of reorganization modifications.

"The debtors should not be allowed to use momentum to push through to confirmation a plan that wrongfully forfeits value that belongs to existing equity," the committee said.

"In their zeal to emerge from Chapter 11, the debtors have formulated a modified plan structure that fails to provide existing equity with just compensation for the harm and damage caused by GM," the committee said in the filing.

The committee said it has made it clear to the court that Delphi's current circumstances stem in large part from "the direct result of a scheme perpetrated by GM pursuant to which GM used the debtors to improperly prop up GM's balance sheet and operating performance at the expense of the debtors' estates and Delphi's existing equity holders."

"The debtors and Delphi's existing equity holders have been harmed and damaged since the debtors' inception and every day thereafter by GM's domination and control," the committee said in the filing.

According to the committee's filing, distributions of value from GM must be made on the basis of the wrongful acts and the resulting and repeated harm and damage to existing equity, and a fair "portion of the value obtained from GM through the GM settlement - clearly greater than the insufficient distribution offered under the modified plan - should and must be allocated to existing equity holders."

The committee said Delphi's emergence from Chapter 11 bankruptcy by the end of the year must be subjected to two key requirements, including fair allocation of a portion of the GM settlement to existing equity holders and assurance that Delphi's plan is feasible by obtaining required financing and liquidity for the reorganized company.

However, the committee said the company would require favorable markets for financing and capital that are not available today, "and it does not appear that such favorable markets will be available prior to Dec. 31, 2008."

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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