Friday, April 20, 2007
The remaining investors will continue to with their plan to buy into Delphi.
DETROIT (AP) -- Delphi Corp.'s planned exit from bankruptcy protection will be delayed, and a key investor is likely to pull out of a deal to pump up to 3.4 billion into the troubled auto parts maker, the company said Thursday.
A spokeswoman for Troy-based Delphi said it expects Cerberus Capital Management LP to leave a group of investors that in December pledged to sink capital into the company in exchange for new shares of its stock.
Delphi had planned to emerge from Chapter 11 by the end of June, but spokeswoman Claudia Piccinin said the possibility of Cerberus withdrawing adds another hurdle to already complex proceedings. She said the reorganization would more likely be completed now in the second half of the year.
The company expects Cerberus to pull out of the investment group, although it has not yet done so, Piccinin said.
"This is an expectation that we have based on conversations," she said.
Cerberus declined to comment, but if it pulls out, Delphi would be left with a 1.7 billion hole in the investment needed to get out of bankruptcy protection.
Piccinin said the company will proceed with the remaining investors in the group, Appaloosa Management LP, Harbinger Capital Partners Master Fund I, Merrill Lynch & amp; Co. and UBS Securities LLC. Other investors could be added to raise the additional cash, or Delphi could use its own cash freed up by repaying unsecured creditors with more stock.
"We're still moving forward, but the makeup of our investment group may look different," Piccinin said.
Appaloosa founder and President David Tepper would not comment on any possible move by Cerberus, but said his Chatham, N.J.-based hedge fund is in the Delphi investment group to stay.
"We've been here and we'll continue to be," he said Thursday.
When the investment agreement was announced in December, the company said it was contingent on reaching a wage and benefit agreement with Delphi's labor unions.
Testy talks
Recently, negotiations involving the investors, Delphi, General Motors Corp. and the United Auto Workers have grown testy, with the union rejecting a wage offer and UAW President Ron Gettelfinger threatening to strike if Delphi proceeds with an effort to get bankruptcy court permission to scrap its labor contracts.
The UAW also has been reluctant to grant further concessions sought by Cerberus. Previously, it had agreed to reducing Delphi's work force through mass buyouts and early retirement offers and to lowering wages for new workers hired to replace some of those who left.
On Wednesday, Gettelfinger stopped short of saying that the union is developing strike plans, although its officials are traveling the country to brief members on the Delphi talks.
"We're moving forward internally because this thing has gone on long enough," he said.
Kevin Reale, an analyst with Endeca Technologies Corp. of Cambridge, Mass., an automotive technology company, said losing Cerberus could put more pressure on the union regarding wages and benefits. The alternative is for Delphi to sell more units or move operations to lower-cost countries, he said.
"Either way, the union is going to have to be more flexible," Reale said.
GM, which could be shut down by a strike at Delphi, will do all it can to prevent one, Reale said.