Delphi gets court OK of adjusted executive bonus plan; two-month exclusivity extension

By Rebecca Melvin

New York, March 19 - Delphi Corp. received court approval of a number of requests Wednesday, including continuing an adjusted key employee compensation plan, extension of its exclusive plan-filing period and approval of sales of its steering and bearings businesses, as well as the sale of certain assets and inventory of Delphi's Kettering, Ohio, damper business.

Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York reaffirmed his approval of the sale of Delphi's global steering and halfshaft business because most objections filed in response to the Feb. 21 approval have been resolved.

Of the 35 matters that were raised, 28 have been resolved, Delphi counsel John Butler of Skadden, Arps. Slate, Meagher & Flom said during the hearing.

The seven remaining items were stripped out of Wednesday's approval, and they will be addressed at hearings in April. The steering business sale is set to close April 30.

Under the continued short-term at-risk performance executive payment plan, key executives will divide a total bonus package of $21.2 million if the auto parts maker makes its minimum performance target of $871.7 million EDITDAR for the first half of 2008.

If the Troy, Mich.-based company generates "above plan," or more than $1.3 billion of EBITDAR in the first six months of the year, then executives can receive up to $39.1 million.

The plan is contingent on the company "making plan" and also emerging from Chapter 11 bankruptcy protection by Aug. 15. If the company is still in bankruptcy at that point and doesn't meet its targets, then the executive compensation plan will be opened up to input from the creditors committee and the United Auto Workers.

This contingency represents a negotiated settlement to objections raised in relation to the key employee compensation plan.

The company told the court that the financial targets for first half of 2008 are "reasonable and appropriate."

Also at the omnibus hearing Wednesday, Delphi received approval to extend by two months its exclusive reorganization plan-filing period to May 31, and the period to solicit votes on the plan to July 31.

Wheel bearings business goes to Kyklos

Judge Peck also approved the sale of Delphi's global wheel bearings business to alternative bidder Kyklos Bearing International Inc. Originally, bidding procedures were approved for the sale of the unit to a subsidiary of ND Acquisitions Corp., the stalking horse bidder.

Kyklos and another party, WND Acquisition Co. LLC, emerged as qualified bidders late in the sale process. The Kyklos bid, quantified at $18.7 million, represented an increase of $500.000 from the quantifiable value of the purchase price set forth by ND Acquisitions.

In other action, the sale of Delphi Automotive Systems LLC's Kettering assets and inventory to Tenneco Inc. for about $19 million was also approved.

As previously reported, Delphi, an automotive electronics manufacturer, received court approval of its plan of reorganization on Jan. 22. It had expected to emerge from Chapter 11 bankruptcy on March 31. Subsequently, it has been unable to secure necessary exit financing for emergence, and now the company says emergence is expected to occur "as soon as practical."

"Progress on financing has been made, and when syndication is complete, we will make announcements about that," Butler said. He wouldn't comment further after the hearing.

The facility consists of a $1.7 billion first-lien term loan (Ba2/BB-), a $2 billion first-lien term note (B2/B) to be issued to an affiliate of General Motors Corp. (junior to the $1.7 billion term loan), an $825 million second-lien term loan (B3/B-), of which any unsold portion would be issued to General Motors and/or its affiliates, and a $1.6 billion ABL revolver.

When the company first launched its exit facility in early January, the deal was comprised of a $3.7 billion first-lien term loan (Ba3/B+), an $825 million second-lien term loan (B3/B-), of which $750 million was expected to be issued to General Motors in connection with plan of reorganization distributions, and a $1.6 billion ABL revolver.

Also, initially, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to the first launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

Delphi filed for bankruptcy protection on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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