Judge approves Delphi’s $6.8B refinancing plan

Objectors say approval of Delphi’s plan was
premature.

NEW YORK (AP) — A judge approved a $6.8 billion financing plan Friday for Delphi Corp.’s exit from bankruptcy.

But the judge also admonished potential equity investors who he said had drained away hundreds of millions of dollars as the auto parts supplier disclosed new terms earlier this week for investing in the company.

Delphi, which is based in Troy, Mich., had originally sought $8.7 billion in loans, but had reduced that amount and delayed voting on its reorganization plan as it struggled to secure the financing in a tighter credit market.

Its exit financing includes a total of $6.8 billion, comprising $5.2 billion to replace its current debtor-in-possession loans as well as a $1.6 billion revolving loan that it already has. Delphi has $4.5 billion in DIP loans currently.

On Wednesday, Delphi made public new terms for investing in the company post-bankruptcy that were more favorable to an investor group led by Appaloosa Management LP.

The terms of who can buy stock in the new Delphi, and at what price, had been renegotiated after Goldman Sachs had pulled out of the deal.

U.S. Bankruptcy Judge Robert Drain said he was “very distressed” the terms had changed, “sucking out hundreds of millions of dollars over these apparent excuses.”

Drain told investors to go back in the next couple of weeks and told them to reconsider the direction of the case. The creditors and equity committees object to the latest plan. New terms could be filed Nov. 28, Delphi lawyer Jack Butler said.

The investor group led by Appaloosa also includes Harbinger Capital Partners Master Fund I Ltd.; Merrill Lynch, Pierce, Fenner & Smith Inc.; UBS Securities LLC; and Pardus Capital Management LP.

Goldman has since rejoined as an investor. A call to Goldman seeking comment was not immediately returned.

A hearing to approve the company’s disclosure statement, its explanation of how creditors will be paid, is scheduled to continue Nov. 29. Approval of the disclosure statement allows Delphi to begin soliciting votes on its reorganization plan. That hearing had been delayed twice as the company negotiated for financing.

The judge granted his approval of the loans over the objections of creditors as well as other stakeholders who argued the approval was premature.

Its reorganization plan in cludes a proposal for the Appaloosa group to inject as much as $2.55 billion into a restructured Delphi.

The current plan estimates the company’s total enterprise value to be $13.4 billion, which is down from an earlier $13.9 billion estimate made in early September.

General Motors Corp., Delphi’s former parent and a major customer, has also reduced its expected recovery to $2.6 billion in cash and stock.

Drain also approved the extension of the company’s current debtor-in-possession loan and the sale of assets from its chassis business.

Delphi has been operating under court protection since October 2005. It expects to emerge in the first quarter of next year.

The exit financing is being done by JP Morgan Securities Inc., JP Morgan Chase Bank and Citigroup Capital Markets Inc.