Delphi completes sale to lenders and GM, emerges from bankruptcy

By Caroline Salls

Pittsburgh, Oct. 6 - Delphi Corp. emerged from Chapter 11 bankruptcy Tuesday, ending a four-year case that hit a major snag when the company's initial equity investors pulled out of their commitment in April 2008, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

Delphi received court approval of its first-amended plan of reorganization on July 30.

The plan incorporates a pure credit bid submitted by Delphi's debtor-in-possession lenders and has the support of General Motors Corp.

As previously reported, Delphi named JPMorgan Chase Bank, NA, as the administrative agent under its May 2008 credit agreement, as the winner of the company's auction on July 27.

Upon accepting the credit bid, Delphi also announced that its DIP lenders and General Motors had agreed to modify their financing agreements to provide liquidity through a combination of loans from GM, Delphi's use of cash collateral accounts pledged to the DIP lenders and the repatriation of excess liquidity from Delphi's global affiliates.

Completion of the credit bid transaction satisfies amounts owed by Delphi and its affiliates to its DIP lenders.

Under the credit bid, Delphi said GM Components Holdings, LLC and newly formed entity DIP Holdco 3, LLC will acquire substantially all of Delphi's assets and liabilities.

According to a company news release, Rodney O'Neal will remain president and chief executive officer, and the current leadership will continue to manage the company's global operations.

O'Neal said in the release that Delphi's balance sheet will be sufficiently capitalized to invest in technology, and to absorb planned restructuring and resultant social costs as the company consolidates excess capacity around the world.

"We expect 2010 gross engineering and R&D spending to be about 11% of sales, allowing us to maintain our intense focus on technologies, products and services that help our customers deliver vehicles that are safer, greener and allow purchasers to remain connected to their busy lives," O'Neal said in the release.

Delphi said its product portfolio remains centered on electronics and safety, powertrain, thermal, electrical and electronic systems, OE service and the independent aftermarket.

"We are clearly focused on game-changing technologies that meet market demands and help address societal concerns in an intense global environment," O'Neal said.

"We expect that the industry and the competitive environment will continue to be demanding, but the restructuring we have already completed creates a strong platform and we expect to capitalize on that."

GM Components terms

The GM Components consideration includes:

• The assumption or payment of the applicable cure amounts associated with the contracts and leases to be assigned to GM;

• The waiver by New GM and Old GM of their pre-bankruptcy claims, administrative claims and future claims;

• The payment of $291 million to the DIP facility agent;

• The payment of up to $50 million to Delphi to cover wind-down budget expenses; and

• Up to $15 million of professional fees, plus up to $12 million of the costs of solicitation for the modified plan, provided that the amount of these fees and the cure amounts to be paid or assumed by GM will not exceed $148 million.

DIP lenders consideration

The consideration to be provided by DIP Holdco 3 includes:

• The assumption of liabilities;

• The assumption or payment of cure amounts associated with the contracts and leases to be assigned to DIP Holdco 3;

• The credit bid;

• Up to $15 million of professional fees; and

• Payment of an up to $300 million deferred cash consideration to the holders of general unsecured claims.

Additional terms

In addition, the DIP lenders will acquire all of the company's remaining businesses after a wind-down, up to a maximum of $500 million after GM has recovered all of its advanced wind-down costs.

The DIP lenders will enter a loan agreement, note agreement and investment agreement, and Elliott Associates, LP and one or more investment funds managed by Silver Point Capital LP will serve as commitment parties.

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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