Judge: Sale can’t be private

delphi bankruptcy

NEW YORK (AP) — A bankruptcy judge said Wednesday that a formal sale process needs to be put in place in order to ensure that the potential sale of Delphi’s assets results in the greatest possible return for the auto supplier’s stakeholders.

U.S. Judge Robert Drain said potential bids from the Troy, Mich.-based Delphi Corp.’s lenders and other parties need to be considered before the deal between the company and an affiliate of the private equity firm Platinum Equity can be allowed to go through.

“I don’t understand what’s so special about Platinum,” Drain said. “They probably have a lot of money and they have good lawyers. But there are other people who have a lot of money and good lawyers too.”

“As far as I’m concerned, they’re just guys in suits and there are other guys in suits who might be able to pay more,” he added.

Lawyers for many of the company’s lenders packed a New York Court room for what at times was a heated hearing.

Under the deal announced earlier this month, Delphi plans to sell some of its assets to Parnassus Holdings II LLC, an affiliate of Platinum Equity, which will operate Delphi’s businesses both in the U.S. and abroad.

If successful, the deal could lift Delphi out of Chapter 11 after nearly four years of court oversight as early as this summer.

General Motors Corp., Delphi’s former parent and still largest customer, will provide $2 billion to help finance the deal. It also will acquire some of Delphi’s North American plants, including its global steering business. Other “non-core” plants and assets will be sold off over time.

GM also will provide a $250 million credit facility to keep the company going until its expected exit from bankruptcy protection late this summer, along with a $500 million loan facility following the sale.

If Delphi can not convince creditors to support the deal before a July 23 hearing, it would resort to a 363 sale, which refers to the section of the bankruptcy code that outlines the process for an auction of assets that the court oversees.

Drain gave preliminary approval for the use of the $250 million credit facility on Wednesday.

Delphi attorney Jack Butler said the agreement between Delphi, Platinum and GM was the result of hundreds of hours of negotiations that took into account GM’s supplier needs. Any competing bid would have to do so as well, he said.

“What everyone in this room wants to ignore is that GM is providing $4 billion in financing, based on its own supply agreement needs and that without that this company would be in liquidation,” Butler said.

But attorneys for some of Delphi’s secured lenders said that the company shouldn’t cave to the demand of GM and the government, regardless of the relationship between the two companies.

“The government’s policies related to the resuscitation of the U.S. auto industry need not ignore the needs of creditors,” said Glenn Siegel, an attorney for the lenders Kensington International Ltd., Manchester Securities Corp. and Springfield Associates LLC.

“We need to be part of the process. This is not the GM bankruptcy, it’s the Delphi bankruptcy.”