Delphi inks new exit plan driven by Parnassus, GM affiliate deals

By Caroline Salls

Pittsburgh, June 1 - Delphi Corp. has filed further changes to its first amended plan of reorganization under which the company plans to emerge from Chapter 11 bankruptcy through a transaction with Parnassus Holdings II, LLC and with the support of General Motors Corp. affiliate GM Components Holdings LLC, according to a company news release.

Parnassus is an affiliate of Platinum Equity.

The company said the new emergence structure is similar to the one included in its previously confirmed plan, but, instead of plan investors emerging as the majority owner of the continuing business enterprise, Parnassus will operate Delphi's business going forward with emergence capital and roughly $3.6 billion in capital commitments.

The amended plan also eliminated the labor-related legacy costs associated with the North American sites that are being acquired by GM Components Holding LLC together with Delphi's global steering business.

Delphi said some other residual non-core and non-strategic assets and liabilities, which are expected to be divested over time will be retained by a reorganized entity emerging as DPH Holdings Co.

"After an extended period of complex and challenging discussions with a wide range of stakeholders, we are confident that these modifications to our confirmed plan of reorganization will provide a resolution that will allow Delphi to emerge from Chapter 11," Delphi chief executive officer and president Rodney O'Neal said in the release.

According to O'Neal, Delphi's emerging businesses will continue to develop technology and products and produce them for the benefit of its customers under the guidance of Platinum, a company with experience providing operational support to companies to help them create long-term value.

The final hearing on the emergence transactions has been scheduled for July 23, and a final hearing on an incremental $250 million debtor-in-possession facility is scheduled for June 16.

Pre-emergence funding

According to the release, GM will provide Delphi with up to $250 million of pre-emergence liquidity under an amended and restated Delphi-GM arrangement to support Delphi's transformation plan and plan of reorganization through July 31.

"A healthy, sustainable supply base is the best foundation for any effort to revitalize the auto industry," Platinum Equity chairman and CEO Tom Gores said in the release.

"Automakers need strong suppliers in order to rebuild their own businesses and return to profitability. It starts from the ground up and we look forward to contributing to that process.

"We know the business very well and understand its potential."

Under the modified plan, Delphi will sell some U.S. plants to affiliates of GM, including Delphi's global steering operations and the U.S. manufacturing sites located in Kokomo, Ind., Wyoming, Mich., Lockport, N.Y., and Rochester, N.Y.

Delphi said Monday's agreement with GM Components Holdings LLC supersedes the previous GM Steering Option Exercise Agreement, which had been pending Bankruptcy Court approval and will be withdrawn.

Plan changes

Specific changes will include:

• The amended plan calls for acquisition of the company's operating businesses by Parnassus and some North American operations and the global steering business by GM affiliates, compared with a $2.55 billion plan investment under the confirmed plan;

• The $1.75 billion discount rights offering called for under the confirmed plan has been eliminated;

• No funded debt is included in the amended plan; instead non-recourse emergence capital will be funded by GM, and Parnassus has obtained $3.6 billion in emergence capital and capital commitments to support Delphi's operating businesses going forward. The previous plan called for $4.7 billion in emergence funding;

• On the plan effective date, the remaining assets and liabilities of Delphi's hourly pension plan will no longer by the company's responsibility, and it will be addressed by GM.

Delphi said it expects the salaried and some subsidiary pension plans to be involuntarily terminated by the Pension Benefit Guaranty Corp., which will receive an unsecured pre-bankruptcy claim in settlement;

• Under the amended plan, GM will buy some of Delphi's assets and will provide funding, waive claims and assume specified liabilities. GM will not receive any distribution on its allowed claim.

Under the previous plan, GM was slated to receive $4.073 billion in cash, junior preferred securities, assumptions and a second-lien note;

• Second-priority term loan claims will be satisfied in full on the plan effective date through a transaction that provides for the payment of $291 million in cash, a $145.5 million nominal amount interest in Parnassus with a preferred return at a rate of 8% to be paid under a waterfall formula and up to $146 million in plan investor settlement or lawsuit proceeds;

These claims were slated to be paid in full in cash under the previous plan;

• Unsecured creditors will receive a share of deferred compensation under the master disposition agreement, compared with the $12.8 billion new common stock, rights offering equity and notes recovery slated under the previous plan;

• No post-bankruptcy interest will be paid on any general unsecured claims under the amended plan;

Nothing for equityholders

• MDL Litigation creditors will receive no recovery under the amended plan, as opposed to unsecured claim treatment called for under the previous plan; and

• Equityholders will receive no distribution under the amended plan, compared with the $28 million in new stock, $321 million in warrants and rights offering participation offered under the previous plan.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-44481.

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