Delphi granted interim OK of amended accommodation agreement; final hearing April 23

By Caroline Salls

Pittsburgh, April 3 - Delphi Corp. obtained interim court approval to amend its accommodation agreement with its debtor-in-possession facility lenders, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The final hearing is scheduled for April 23.

As previously reported, the accommodation agreement contains milestone dates, which, if not met, require Delphi to apply the $117 million currently held as cash collateral to pay down a portion of the tranche A and tranche B facilities under the DIP facility.

Under the milestones, availability on Delphi's agreement with General Motors Corp., under which GM agreed to provide up to $300 million in advances through June 30, was required to be increased to $450 million by March 25.

GM had agreed to increase its commitment, but the increase was conditioned on GM not receiving an objection notice from the U.S. Treasury and Delphi receiving bankruptcy court approval.

However, GM received a notice on March 23 from the Treasury objecting to the proposed increase, and Delphi was forced to postpone the court hearing for approval of the amendments, meaning it was not able to meet the milestone.

Because it did not meet the milestone, Delphi would have been in default under the accommodation agreement if it did not make a payment by March 31, and the prescribed minimum liquidity amount under the agreement was not reduced to $50 million from $100 million, which also would have triggered a default.

Under the accommodation agreement amendment, Delphi will now have until April 7 to make the payment or to obtain court approval that will allow it to avoid the payment and continue using the DIP loan proceeds.

If the availability under the GM advance agreement is not increased to $450 million by April 7, then the amounts in the cash collateral basket will be applied to amounts outstanding under the DIP facility on April 8.

In addition, Delphi has agreed to provide a timeline for resolution of its Chapter 11 case agreed to by GM and the Treasury by April 7.

The prescribed minimum borrower liquidity level was reduced to $25 million under the amendment, but will revert back to $100 million on April 8 unless the GM advance agreement facility has been increased to $450 million by April 7.

An additional event of default will be triggered under the accommodation agreement if Delphi proceeds with a hearing on the motion to approve a steering option exercise agreement or sells its steering business without first receiving the written consent of a majority of tranche A and tranche B lenders who have signed the accommodation agreement, as well as a majority of all lenders who signed the agreement.

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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