Delphi Corporation has negotiated a new private equity deal that will pump $2.55bn into the reorganised parts maker and bring it out of Chapter 11 bankruptcy protection.
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It has signed an equity purchase and commitment agreement with affiliates of lead investor Appaloosa Management; Harbinger Capital Partners Master Fund I; Merrill Lynch, Pierce, Fenner & Smith; UBS Securities; Goldman Sachs; and Pardus Capital Management.
The company said the new investment agreement is supported by key customer General Motors.
“[The] equity purchase and commitment agreement – and the support that it has received from our statutory committees and GM – represents additional progress in our transformation and provides further evidence to customers and other stakeholders that Delphi should receive the financial support necessary to emerge successfully from Chapter 11 reorganisation,” said Delphi chief restructuring officer John Sheehan.
“Delphi is now focusing on reaching labor agreements with its remaining US unions and finalising a settlement agreement with GM. We now expect to file our plan of reorganisation before the end of the third quarter and to emerge from [Chapter 11] by the end of the year.”
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By GlobalDataThe new investment agreement includes an earlier commitment – made for a previous deal that was not completed – to preserve Delphi’s US pension plans and will also fund contributions to the plans that were not made fully during the Chapter 11 bankruptcy protection process.
The combined ‘plan investors’ will commit to purchase $800m of convertible preferred stock and approximately $175m of common stock in the reorganised Delphi. They will also commit to purchasing any unsubscribed shares of common stock in connection with an approximately $1.6bn rights offering that will be made available to existing common stockholders subject to approval of the bankruptcy court.
The rights offering would commence following confirmation of Delphi’s plan of reorganisation and run for 30 days. The private equity investors could invest up to $2.55bn in the reorganised company.
The new agreement further outlines Delphi’s proposed reorganisation, which includes payments to creditors and shareholders, treatment of GM’s claims, and corporate governance of the reorganised company.
These provisions had been the subject of a separate plan framework support agreement between Delphi, GM and the investors in the earlier now-terminated deal.
Under the new investment plan, all senior secured debt would be refinanced and paid in full and administrative and priority claims would also be paid in full.
Trade and other unsecured claims and unsecured funded debt claims would be satisfied in full with $3.0bn of common stock (66.7m out of a total of 147.6m shares) in the reorganised Delphi, at $45 per share, and approximately $1.2bn in cash. The framework requires that the amount of allowed trade and unsecured claims not exceed $1.7bn.
In exchange for GM’s financial contribution to the plan, and to meet GM’s claims against the company, the automaker will, among other things, get $2.7bn in cash.
