Delphi wins court’s OK to change GM pacts
NEW YORK — Auto-parts maker Delphi Corp., in a court ruling that will relieve it of billions of dollars in pension liabilities as it seeks to exit bankruptcy, won approval to change agreements with former parent General Motors Corp.
U. S. Bankruptcy Judge Robert Drain in New York approved the changes Thursday, after Troy, Mich.-based Delphi reached an agreement on the changes with the committee of unsecured creditors that had opposed them.
“All’s well that ends well,” creditors attorney Robert Rosenberg told Drain after withdrawing his objection to the changes, which boost GM’s financial contributions to Delphi to $10.6 billion from $6 billion.
The company will file changes to its turnaround plan as soon as possible and look to raise exit financing, Delphi attorney John Butler Jr. said. He declined to describe the capital structure the reorganized company would have.
Butler called the court ruling “a major milestone.”
Drain’s approval means Detroitbased GM is to take on $3.4 billion of Delphi’s pension liabilities, preventing the federal Pension Benefit Guaranty Corp. from putting a lien on Delphi’s foreign assets.
“This is a victory for Delphi’s workers and retirees, and represents a major step toward a successful reorganization,” PBGC Director Charles E. F. Millard said in a statement.
Drain also gave approval for GM to lend Delphi an additional $300 million on top of an existing $650 million loan. Delphi must file the proposed changes to its turnaround plan by Oct. 31 to access the loan.
Creditors had opposed the reorganization plan, saying Delphi was giving away control to GM.
Under the plan, GM’s $2.1 billion administrative claim in the bankruptcy is to be paid with preferred stock. Under the proposed terms of Thursday’s settlement, GM would convert preferred stock to common stock and grant it to creditors to provide them a 20 percent return if they don’t get at least 20 cents on the dollar for their claims, Butler said.
If Delphi doesn’t complete a reorganization that allows it to keep its main operations, GM would split the first $600 million it is paid on the administrative claim with the creditors. GM’s $2.5 billion unsecured claim is unaffected, Butler said.
The proposed changes also allow Delphi to buy back as much as half of GM’s preferred stock within six months of emerging, at a 15 percent discount, Butler said.
Delphi, part of GM until a 1999 spin-off, is still the automaker’s largest supplier. Delphi’s Town of Lockport plant has about 2,600 employees, including about 2,200 hourly workers.
