(RTTNews) - Auto-parts maker Delphi Corp.
(DPHIQ.PK), Friday said it has satisfied the requirements for closing plans of reorganization for exiting bankruptcy. The announcement followed an earlier decision by a group of plan investors, led by Appaloosa management, to back out from a proposed investment of about $2.5 billion in closing the reorganization plan.
Delphi's $6.1 billion exit financing package includes a $1.6 billion asset-backed revolving credit facility and a first-lien term loan of at least $1.7 billion. The package also involves $2 billion of first-lien term note to be issued to GM and an $825 million second-lien term loan, of which any unsold portion would be issued to GM.
The investor group alleged Delphi of not meeting the requirements for the financing and decided to terminate the Equity Purchase and Commitment Agreement. Citing an array of reasons, the plan investors asserted that they were not obligated to fund investment commitments to Delphi.
In a related statement, General Motors expressed disappointment over the decision by Appaloosa and the plan investors to withdraw support for Delphi. GM said it would continue to work with the involved parties to facilitate Delphi's efforts to emerge from bankruptcy.
Delphi, along with its affiliates, had jointly filed a voluntary petition for reorganization under the U.S. Bankruptcy proceedings in October 2005, as the company had not been able to secure the $7.1 billion debt financing that it needed to pay creditors, including its former parent General Motors.
The transformation initiatives proposed by the Michigan-based Delphi under the restructuring program comprised of competitive collective bargaining agreements with unions, settlement and commercial agreements with GM, developing a product portfolio focused on core businesses, a organizational structure focused on customer and product as well as funding of pension plans after emergence from bankruptcy.
President of Delphi Rodney O'Neal commented, 'We have accomplished the commitments in our restructuring plan. We are proud of the fact that we have never disrupted our customers' operations during this reorganization. We also have kept the pipeline full of exciting technologies and products to meet the challenges facing our customers -- to make vehicles safer, greener and more connected to consumers' lives than ever before.'
In January 2008, the United States Bankruptcy Court for the Southern District of New York ruled that Delphi had met all of the statutory requirements required per the plan of reorganization. The court entered an order validating the first amended joint plan of reorganization, allowing the company to emerge from Chapter 11 bankruptcy protection. The approval of the plan by the bankruptcy court was subject to Delphi reducing cash bonuses for top executives, to $16.50 million from a proposed $87 million, which was accomplished by Delphi later.
Delphi's plan of a bail out from bankruptcy hit another roadblock in December 2007 as the chief lenders JP Morgan Chase and Citigroup Inc. were faced with difficulties in syndicating the loan to other lenders. Investors were of the opinion that the terms of the plan were not appropriately priced for the risk involved. The situation reflected the prevailing difficult conditions in credit markets, where banks were not willing to provide financing. Furthermore, the declining U.S. auto sales and lowered forecasts for General Motors' sales in 2008 prevented Delphi from trying to gain a smaller exit-financing package.
In November 2007, Delphi reached an agreement with General Motors and Plan Investors on amendments to its Joint Plan of Reorganization, Global Settlement Agreement and Master Restructuring Agreement. In addition to the Investment Agreement with Delphi's Plan Investors, the potential amendments reflected changes required by Plan Investors to obtain endorsement of the Plan, the company's settlements with GM and its labor unions, and the company's emergence business plan and related agreements.
For its latest fourth quarter, Delphi reported a net loss of $542 million, including a charge of $595 million to write down assets of discontinued operations based on expected proceeds, compared to fourth-quarter 2006 net loss of $853 million. Fourth quarter revenues declined to $5.3 billion from $5.5 billion in the same quarter last year.
DPHIQ.PK is currently trading at $0.10, down $0.02 or 16.67%, on a volume of 6.84 million shares. The stock has been trading in the range of $0.04 to $3.12 for the past one year, with a three-month average volume of 3.58 million.
Shares of GM are trading at $20.83, down $0.76 or 3.52%, on a volume of 11.22 million.
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