Delphi says board chose credit bid as 'more attractive alternative'

By Caroline Salls

Pittsburgh, July 28 - Delphi Corp. said its board of directors chose the pure credit bid submitted by its debtor-in-possession lenders as the winner of its auction as "the more attractive alternative," even though the bid submitted by a Platinum Equity Capital Partners, LP affiliate provided a higher consideration, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

The company said the board's decision was "based in part on the speed and certainty of execution of the pure credit bid," compared with the risks associated with the Platinum transaction, which was not supported by the required DIP facility lenders.

Without the support of the required DIP lenders, Delphi said it could not move forward with the proposed changes to its confirmed plan of reorganization.

If it could not move forward with the plan changes, the company said the potential distributions to general unsecured creditors would be eliminated.

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

GM Components terms

The GM Components consideration will include:

• 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 would 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.

Similar to the Platinum agreement, 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.

Platinum response

According to a Platinum Equity Partners news release, the DIP lenders' pure credit bid placed a more than $3.4 billion value on their claims against Delphi.

Platinum Equity also said the DIP lenders "refused to release their liens on Delphi's assets, forcing a conclusion to the auction stage of the Delphi bankruptcy process."

Platinum Equity said it is continuing its discussions with the DIP lenders in advance of Delphi's asset sale hearing on Wednesday.

"We continue to believe that with the right plan, Delphi can establish itself as a strong, viable competitor in the global automotive industry," Platinum Equity said.

As previously reported, Delphi announced Monday that a pure credit bid from JPMorgan Chase Bank, NA as administrative agent under its May 2008 credit agreement was the winner of the company's auction.

The decision was made by Delphi's board after a two-day sale process and consultations with the official committee of unsecured creditors and the company's largest U.S. union.

Delphi said the credit bid is also supported by General Motors Co. and is based on a "transaction structure" similar to that announced on June 1 with Parnassus Holdings, LLC, an affiliate of Platinum Equity and GM Components Holdings, LLC, a GM affiliate.

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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