Delphi says it has to seek smaller financing package

Delphi shareholders no
longer will be able to buy new stock at a discount.

DOW JONES NEWSWIRES

DETROIT — Delphi Corp., the auto supplier trying to leave bankruptcy, said credit-market turmoil has forced it to seek a smaller financing package that cuts more than $3 billion in cash payments to its unsecured creditors and General Motors Corp.

Delphi’s unsecured creditors will instead have the option to buy new Delphi stock at a discount through a rights offering, according to court papers filed late Monday. GM, Delphi’s largest customer, will get a combination of cash, new debt and new convertible preferred stock.

The scaled-back exit-financing also would squeeze Delphi’s current shareholders. The shareholders will no longer be able to buy shares in the reorganized company at a discount, but they’ll still have the option of buying up to 12.7 million shares of Delphi’s new common stock at face value of $41.58 a share.

Delphi, formerly the auto-parts division of GM with about 6,000 workers in Ohio, originally sought to obtain about $8.7 billion in financing, including a $1.6 billion asset-based revolver, a $5.6 billion exit term loan and $1.5 billion unsecured notes. Now, the company is trying to ink a $6.8 billion deal that includes a $1.6 billion asset-based, first-lien revolver, a first-lien term loan of at least $3.7 billion and a senior secured second-lien loan of up to $1.5 billion.

In court papers, Delphi attributed its exit-financing troubles to a “severe dislocation in the capital markets.” Delphi said it’s in advanced discussions with lenders and thinks it will be successful in obtaining the financing.

Delphi, based in Troy, Mich., said it plans to present the package to the U.S. Bankruptcy Court in Manhattan by Nov. 8.