US: Delphi heading out of bankruptcy at last
Delphi has won court approval to sell its assets to its lenders and General Motors and appears on track to to emerge from Chapter 11 bankruptcy after four years.
CEO and president Rodney O'Neal said: "Delphi has executed a dramatic transformation of our business during the restructuring process and will emerge as a strong and resilient company. We look forward to the future with our new ownership."
The company said it planned to emerge from bankruptcy this quarter following the syndication and closing of its exit financing facilities and satisfaction of other conditions.
Private equity firm Platinum Equity had agreed a deal, backed by the US government and largely financed by one-time Delphi owner GM, to take the supplier out of bankruptcy but lenders of the debtor-in-possession financing objected as they would have received back just 20 cents on the dollar.
After they appealed to the US bankruptcy court in Manhattan, Judge Robert Drain ruled competing bids must be sought and the DIP lenders prevailed, though they had to 'forgive' over $3.4bn of the debt.
Under the agreement, GM is acquiring Delphi's steering business in Saginaw, Michigan, as well as four plants in New York, Michigan and Indiana. The remaining businesses will go to the lenders. "Noncore assets" will be sold over time, Jack Butler, Delphi's bankruptcy lawyer, told the Wall Street Journal, adding that the lenders' group had agreed to provide Delphi with $750m in new financing.
GM, now majority-owned by the US government, is making a number of contributions to the deal, including payments to Delphi's bankruptcy lenders and waiving claims against Delphi, the report added.
A rescue of a viable Delphi had been seen as critical to the success of 'new GM' as it depends on the supplier for critical parts for its vehicles. Liquidation of Delphi would have jeopardised supply and forced temporary closure of GM plants.
The federal government's pension regulator, meanwhile, will take over Delphi's pension plans, which cover about 70,000 workers and retirees, the WSJ noted.