Delphi, equity committee object to GM spinoff claim prosecution request

By Caroline Salls

Pittsburgh, Sept. 22 - Delphi Corp. and its official committee of equity security holders objected to a motion that would allow the company's official committee of unsecured creditors to prosecute billions of dollars in potential spinoff claims against General Motors Corp., according to Friday filings with the U.S. Bankruptcy Court for the Southern District of New York.

The committee originally filed the prosecution motion in July 2006 and then renewed the motion earlier this month.

According to Delphi's objection, if the court approves the company's requests to amend its global settlement and master restructuring agreements with GM, the prosecution motion will be moot.

In exchange for the consideration included in the amended agreements, Delphi said GM and the company have agreed to release their litigation claims against each other.

Even if the court does not approve the amended agreements, Delphi said it should deny the renewed prosecution motion and allow the company "to remain in control of settlement negotiations with GM."

Delphi said the creditors committee has conceded that the company's claims against GM would be best resolved through consensual negotiation, and that the committee only wants the discretion to prosecute the claims to increase its leverage to negotiate with GM.

According to the equity committee's objection, it would not be up to the unsecured creditors committee to prosecute the claims against GM if the amended agreements are not approved.

The equity committee said it should be designated to prosecute the claims if the court decides to appoint someone other than Delphi to do so.

"Existing equity holders were and are the constituents most harmed and damaged by the wrongful conduct of GM prior to, during, and subsequent to GM's spinoff of the debtors," the equity committee said in its objection.

As a result, the equity committee has a sufficient interest in pursuing the GM claims. In that regard, control of the GM claims must lie with those who owe fiduciary duties to existing equity holders."

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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