Delphi obtains final approval of $250 million of GM financing; sale bidding procedures in question

By Rebecca Melvin

New York, June 16 - Delphi Corp. obtained final court approval Tuesday for a $250 million credit facility from General Motors Corp. to keep the auto-parts maker going until it can emerge from Chapter bankruptcy.

The funding is part of Delphi's amended and restated GM arrangement that was granted approval by the U.S. Bankruptcy Court for the Southern District of New York.

Additional funds from GM will be forthcoming upon emergence.

GM and the U.S. Auto Task Force asked the court to delay approval to coincide with final approval of Delphi's plan modification order because certain conditions for the financing have not been met.

But judge Robert Drain said he didn't want to hold up the financing order, and assured GM that under the arrangement, the auto maker has rights not to extend financing if certain conditions are not met.

The latest approval is tied to a June 1 agreement to sell certain Delphi assets to private equity firm Platinum Equity, a subsidiary of Parnassus Holdings II LLC.

Subsequent to the June 1 agreement, Drain ordered that an auction for the sale be held to afford opportunity to rival bidders for the assets, including a potential "credit-bid" from Delphi's debtor-in-possession lenders, a group that complained about the sale of assets to Platinum.

Bidding procedures in question

Bidding procedure issues related to the Platinum sale were raised Tuesday, but Drain made it clear that he wasn't making any rulings on bidding procedures or creditor issues on Tuesday.

He also said, "I don't want these procedures to be a device to restrict rights."

"I believe that any buyer interested in these assets is not tied to the exact terms that are on the table," Drain said, asserting that Delphi will be making a determination to the highest and best bidder.

Delphi counsel, Jack Butler of Skadden, Arps, Sate, Meagher & Flom, told the court that there is a "holdup" because the DIP lenders were unwilling to go forward with the rules that are on the table associated with the sale to Platinum.

Reclamation claims

Also Tuesday, Delphi's request to convert a previously settled $17 million of reclamation claims into unsecured claims from priority status was approved.

The reclamation claims were reduced to $17 million from $35 million through a prior settlement, and the claims originally totaled $385 million, Butler told reporters after the hearing.

Objecting to the reclassification of the reclamation claims were Hitachi Chemical (Singapore) Pte Ltd., JP Morgan Chase Banks NA and Goldman Sachs Credit Partners.

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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