RESTRUCTURING
Delphi delays bankruptcy hearing
NEW YORK — Delphi Corp. on Monday pushed back a court hearing to change the terms of $4.35 billion in bankruptcy loans, an effort to give the company some breathing room amid a seizure of the credit markets.
The auto parts maker rescheduled the hearing for next Monday after its former parent, General Motors Corp., asked for a delay. A later hearing also gives Delphi time to settle objections from lenders, who said the changes were improper and violated the loan agreement.
The extension would give Delphi an option other than trying to secure more loans, especially as GM’s prospects waver. The automaker, facing the worst U. S. auto sales downturn in 25 years, has been burning through tens of millions of dollars a day and has warned that it could reach the minimum amount of money needed to operate by the end of this year.
GM, along with Ford Motor Co. and Chrysler LLC, are seeking $25 billion in government loans to get them through the downturn.
Delphi was a GM parts subsidiary until it was spun off as an independent supplier in 1999. The interests of the two companies remain intertwined, since Delphi is GM’s biggest supplier.
The debtor-in-possession loans — which help fund operations during bankruptcy — were set to expire Dec. 31. Delphi proposed changing the terms to delay maturity of the loan until June 30, 2009, while some lenders have mentioned May 5 as a deadline.
Delphi lawyers have argued that the changes it proposed to the loan agreement give it a “liquidity runway.” Lenders say Delphi’s proposed changes improperly extend the loan’s maturity date against their wishes and unfairly elevate certain lenders above others.
In bankruptcy, creditors receive a ranking and are paid accordingly, if there is money to be paid at the end of the case.
Delphi has been operating under Chapter 11 protection since October 2005. It was forced to redraw its reorganization plan after a group of investors, led by the Appaloosa Management LP hedge fund, pulled out of the deal in April. The Appaloosa group had planned to invest up to $2.55 billion into Delphi in exchange for equity in the reorganized company.
Delphi lawyer Jack Butler said that changes to the loan agreement, together with $600 million in additional liquidity that GM has offered, will give the company a clearer picture of how things will work in 2009.
Lack of credit availability has delayed the case repeatedly.
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