July 19, 2007 -- Delphi Corp. said today that is has a new deal with Appaloosa Management LP in which the private equity firm and other investors will pump $2.55 billion into the auto parts supplier as part its plan to exit bankruptcy. Earlier this month, Troy-based Delphi scrapped an agreement that had the group of investors, led by Appaloosa, infusing Delphi with up to $3.4 billion. A new agreement was expected by the end of the month. The company will file a motion later today asking the bankruptcy court for an expedited hearing and approval of the arrangement.
Under the deal, Appaloosa and the other investors will purchase $800 million in convertible preferred shares and $175 million in Delphi common stock. The group will buy any common shares left unsubscribed after a $1.6 billion rights offering to be made to existing common stockholders. The deal has the investors putting up to $2.55 billion in the reorganized Delphi. It also gives GM $2.7 billion in exchange for the automaker's financial contribution to Delphi's recovery plan and to cover plan GM's claims against the company. "Today's equity purchase and commitment agreement represents additional progress in our transformation," said John Sheehan, Delphi chief restructuring officer. "Delphi is now focusing on reaching labor agreements with its remaining U.S. unions and finalizing a settlement agreement with GM. We're pleased with our recent momentum."
Delphi announced late last year that a group led by private equity firm Cerberus Capital Management planned to invest in the former parts arm of General Motors Corp. subsidiary, providing critical capital to help Delphi restructure. Cerberus pulled out of the deal this spring, shortly before the firm bought an 80 percent stake in Chrysler Group from DaimlerChrysler AG. Cerberus' move left Appaloosa Management, Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities LLC as the remaining investors.
The deal comes a month after Delphi, GM and the United Auto Workers Union brokered a deal that gives workers cash payouts in exchange for wage and benefit cuts. As part of the deal, GM will subsidize the wages and pay other costs for longtime employees as well as take over or find a third party to run several Delphi plants.
Source: The Detroit News
Source: Factiva
