Coming weeks key for Delphi

Supplier works with extra lenders to finance bankruptcy exit; initial investors still in place.

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- The next 20 days will be critical for Delphi Corp.'s future as the company renegotiates with investors, bankers, shareholders, creditors and former parent General Motors Corp. to find a way to emerge from bankruptcy.

Ongoing turmoil in global financial markets has in recent months stymied Delphi's attempt to finance its recovery and forced the Troy-based auto supplier to delay its exit from two years of Chapter 11 protection.

Delphi, which earlier this week said it is working with additional lenders to secure exit financing, issued a statement Friday reiterating that its reorganization plan investors, led by New Jersey-based Appaloosa Management LP, remain in place.

That group, including Harbinger Capital Partners, Merrill Lynch and Pardus Capital Management, have vowed that they still intend to infuse up to $2.55 billion into a newly capitalized company. Delphi hopes to borrow another $6.8 billion.

However, in light of recent developments, the investors moved to terminate amendments to the plan filed in October.

Those amendments included: Granting executives more than $215 million in bonuses, sharply reducing payments to current stockholders and reducing Delphi's proposed debt by $2 billion.

Appaloosa also is Delphi's largest current shareholder and its group of investors owns about 23 percent of the company's stock. Delphi proposed sharply curtailing payments to current shareholders last month because of its financing issues, reducing recovery from an estimated $470 million to just $69 million.

For Appaloosa, that represents a $40 million drop in what it would have received.

Delphi expects to reach agreement with all of the parties by next Friday, so U.S. Bankruptcy Judge Robert Drain can grant approval to the revised plan after a hearing on Nov. 29.

Delphi spokesman Lindsey Williams said Friday the company is committed to reaching an equitable resolution for all of the parties.

JP Morgan Chase and Citigroup have agreed to "use commercially reasonable best efforts to assemble a syndicate of lenders to provide exit financing arrangements," Delphi said in a court filing this week.

Delphi finalized its plan of reorganization and a deal to resolve its outstanding issues with GM on Sept. 6. Afterward, Delphi met with potential lead lenders about its plan to raise $7.1 billion in funded debt and asked for responses by Sept. 14.

By then, the credit market "had suffered a severe correction. The prospective lenders unanimously informed (Delphi) that, given the state of the credit markets, they did not believe Delphi could raise $7.1 billion," Delphi's court filing said.

Delphi would have to accept the risk of paying significantly higher interest rates, its bankers said.

By late September, Delphi began considering alternative proposals, looking to reduce its funded debt. It said in the wake of the Federal Reserve's interest rates cuts its position has improved.

Under the plan, Delphi expects to borrow $6.05 billion when it emerges and pay GM $750 million through a note it will give GM.

Instead of GM getting a settlement of $2.7 billion in cash, GM will get $750 million in cash, a note for $750 million and $1.2 billion in preferred convertible Delphi stock.

GM spokeswoman Renee Rashid-Merem said the company supports the revised deal. GM also disclosed this week it will have to make labor subsidy payments to Delphi through 2015 worth as much as $400 million annually.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.