Delphi looking to further extend pension plan funding waiver to April 7

By Jennifer Lanning Drey

Portland, Ore., March 24 - Delphi Corp. is seeking a second extension of its pension plan funding waivers granted by the Internal Revenue Service in order to avoid a potential $1.4 billion excise tax claim for the pension plan year ended Sept. 30, 2006, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The company wants to extend the pension funding waivers to April 7. The pension funding waivers were previously set to expire if Delphi did not emerge from bankruptcy by March 31, which now appears unlikely, the company said in the motion.

If the waivers do expire by the current deadline, Delphi said it could face the more than $1.4 billion total potential excise tax claim.

Additionally, Delphi requested court approval to increase the outstanding letters of credit it has issued to the Pension Benefit Guaranty Corp. in connection with the IRS funding waivers by $2.5 million. Delphi also wants to extend the letters of credit through April 22.

Delphi already received court approval to increase the $150 million in outstanding letters of credit it has issued to the Pension Benefit Guaranty Corp. by $10 million on Feb. 27.

In the motion requesting further relief, Delphi reiterated to the court that since the company filed for Chapter 11 bankruptcy, it has been making "normal-cost" contributions to its pension plans, which are contributions for amounts related to service provided by plan participants after the bankruptcy filing.

These normal-cost contributions are less than the minimum funding, and, if additional amounts are not contributed within eight-and-a-half months after the end of the plan year for which the contributions are due, an accumulated funding deficiency arises.

Although the company said it disputes the IRS' ability to levy the excise tax penalties, Delphi said it applied to the IRS and the Pension Benefit Guaranty Corp. for pension funding waivers.

As previously reported, on May 1, 2007, the IRS agreed to grant pension funding waivers that extended the June 15, 2007 funding deadline for the plan year ended Sept. 30, 2006, avoiding any accumulated funding deficiency for that year.

The IRS also agreed to settle its excise tax claims for the plan year ended Sept. 30, 2005 in exchange for the company's commitment to make a $10 million accelerated contribution to its hourly plan when it emerges from Chapter 11.

Delphi also agreed to make a second $10 million contribution to the hourly plan as partial pre-payment of its post-emergence minimum funding obligations.

When the court approved the initial funding waiver in May 2007, it also gave Delphi permission to issue $150 million in letters of credit to the Pension Benefit Guaranty Corp.

A hearing on the Monday motion has been scheduled for March 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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