Delphi to receive second pension plan funding waiver to April 7

By Jennifer Lanning Drey

Portland, Ore., March 31 - Judge Robert Drain indicated he would allow Delphi Corp. to obtain a second extension of its pension plan funding waivers granted by the Internal Revenue Service, during a Monday hearing at the U.S. Bankruptcy Court for the Southern District of New York.

The waivers will be extended to April 7, which allows Delphi to avoid a potential $1.4 billion excise tax claim for the pension plan year ended Sept. 30, 2006.

The pension funding waivers were previously set to expire if Delphi did not emerge from bankruptcy by March 31.

Additionally, Delphi received 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. The letters of credit were extended through April 22.

History of waivers

As previously reported, in its motion requesting the relief, Delphi told 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.

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.

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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