Delphi shareholder requests equity committee; indenture trustee calls for creditors committee change

By Caroline Salls

Pittsburgh, Dec. 23 - Delphi Corp. shareholder Appaloosa Management LP asked the U.S. Bankruptcy Court for the Southern District of New York to order the U.S. Trustee to appoint an official committee of equity security holders for Delphi's Chapter 11 case, and Delphi's indenture trustee asked for a change to its official committee of unsecured creditors, according to a Thursday filing.

According to the motion, the company says an equity committee should not be appointed, relying principally on the premises that equity committees are "rarely appointed in Chapter 11 cases" and that Delphi is "hopelessly insolvent."

However, Appaloosa said a review of the 10 largest Chapter 11 cases of public companies demonstrated that equity committees were appointed in four of these 10 cases, "hardly a rare occurrence."

In addition, Appaloosa said Delphi's Chapter 11 filings were not based on any immediate or looming liquidity crisis, but instead were begun solely because Delphi identified a strategic advantage, in light of its inability to reach timely agreement with its organized labor unions, in commencing the cases before recent amendments to the bankruptcy code took effect.

"Although Delphi clearly has substantial employee-related legacy obligations that must be addressed, the circumstances surrounding the filings call into question whether the bankruptcy filings were at all necessary to address such obligations and hardly serve as a basis for presuming that equity is out of the money," Appaloosa said in the motion.

Committee change requested

Delphi indenture trustee Law Debenture Trust Co. of America also requested a change to the membership of the company's official committee of unsecured creditors.

Law Debenture Trust is the trustee for Delphi's 8¼% junior subordinated notes due 2033 and its adjustable-rate junior subordinated notes due 2033.

According to the motion, the beneficiaries of these $412.37 million in notes represent, as a class, one of the seven largest unsecured claims against the company but are entirely unrepresented on the unsecured creditors committee.

Law Debenture Trust said the U.S. Trustee refused to appoint it to the committee because the committee adequately represents the interests of subordinated noteholders.

However, Law Debenture said no current member of the committee holds a claim of the size or purported priority as the subordinated notes.

A hearing on both motions is scheduled for Jan. 5.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8. Its Chapter 11 case number is 05-44481.

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