Delphi looks to continue liquidity from GM, DIP facility through June 30 while it looks to secure exit financing

By Caroline Salls

Pittsburgh, Nov. 10 - Delphi Corp. requested court approval of two agreements with General Motors Corp. that will give the company access to $600 million of liquidity through the end of the second quarter of 2009, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, Delphi is seeking court approval to enter into two agreements with GM that would enhance Delphi's liquidity through June 30.

The company said it wants to extend through June 30 the current arrangement under which GM has agreed to provide up to $300 million of liquidity enhancement, as well as enter into a new agreement under which GM would provide an additional $300 million during the second quarter of 2009 through a temporary acceleration of GM's accounts payable to Delphi.

As a result of the two GM agreements, Delphi would have a total of $600 million of additional liquidity through the end of the second quarter of 2009.

In addition, the company requested court approval to continue to use the proceeds from its $4.35 billion debtor-in-possession financing through June 30.

To secure the continued DIP financing, the company has entered into an accommodation agreement with the DIP agent and some of the lenders that reflects the support of the agent and the expected support of the participating lenders for the company's turnaround efforts, "despite the current economic downturn and the unprecedented turmoil in the capital markets."

Under the agreement, some of Delphi's tranche A and tranche B DIP lenders would agree to allow the company to continue to use the DIP loan proceeds beyond the Dec. 31 maturity date.

During the accommodation period, the company would have continued ability to use the already-drawn proceeds of the DIP facility.

Interest on the tranche A and tranche B portions of the drawn-down amounts will be Libor plus 600 basis points, increased from Libor plus 400 bps and tranche C interest will be Libor plus 725 bps, increased from Libor plus 525.

Delphi said the accommodation agreement is necessary to preserve its liquidity while it seeks exit financing to allow it to emerge from bankruptcy as soon as possible.

The agreement requires the company to either have received binding commitments for debt and equity financing by Feb. 27 or to have filed appropriate changes to its plan of reorganization by Feb. 27 and obtain court approval of the changes by March 31.

A hearing is scheduled for Nov. 24.

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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