Electronics Production | June 02, 2009

Delphi reaches agreements to emerge from Chapter 11 reorganization

Delphi has filed further modifications to its confirmed First Amended Joint Plan of Reorganization and a Supplement to its First Amended Disclosure Statement with the U.S. Bankruptcy Court for the Southern District of New York.
These documents will remain subject to approval by the Bankruptcy Court as part of the reorganization plan modification process. Delphi will effect its emergence from Chapter 11 reorganization through a transaction with Parnassus Holdings II, LLC, an affiliate of Platinum Equity, and with the support of GM Components Holdings LLC, an affiliate of General Motors Corporation.

The emergence structure is similar to that contemplated in the Company's previously Confirmed Plan. However, instead of plan investors emerging as the majority owner of the continuing business enterprise through sponsorship of the Confirmed Plan, Delphi has agreed to contemporaneously effectuate transactions through which Parnassus will operate Delphi's U.S. and non-U.S. businesses going forward with emergence capital and capital commitments of approximately $3.6 billion and without the labor-related legacy costs associated with the North American sites that are being acquired by GM Components Holding LLC together with Delphi's global Steering business. Certain other residual non-core and non-strategic assets and liabilities will be retained by a reorganized entity emerging as DPH Holdings Co., which are expected to be divested over time.

According to O'Neal, Delphi's emerging businesses will continue to develop technology and products and produce them for the benefit of its customers under the guidance of Platinum, a company with experience providing operational support to companies to help them create long term value.

O'Neal said that Delphi had worked diligently to obtain support from Platinum, GM and the Company's lenders and other stakeholders to effect Delphi's emergence from Chapter 11 through the plan modifications filed today with the Bankruptcy Court but has also committed to complete these transactions through a sale of the Company to GM Components and Parnassus if sufficient stakeholder support is not obtained to promptly achieve confirmation and substantial consummation of the modified plan of reorganization. The final approval hearing on the emergence transactions announced today has been scheduled by the Bankruptcy Court for July 23, 2009. A final hearing on the incremental $250 million subordinated DIP facility has been set for June 16, 2009. Delphi expects preliminary hearings previously scheduled for June 2, 2009 to be rescheduled by the Bankruptcy Court to later this week or next week.

Platinum Equity / Parnassus Purchase of Emerged Delphi Business Operations
Platinum Equity will acquire and operate the emerged Delphi U.S. and non-U.S. business operations through its Parnassus affiliate. "A healthy, sustainable supply base is the best foundation for any effort to revitalize the auto industry," said Platinum Equity Chairman and CEO Tom Gores. "Automakers need strong suppliers in order to rebuild their own businesses and return to profitability. It starts from the ground up and we look forward to contributing to that process."

Sale of Certain U.S. Sites and Global Steering Business to General Motors
Under the provisions of the modified Plan, Delphi will sell certain U.S. plants to certain affiliates of GM, including: Delphi's global steering operations, and the U.S. manufacturing sites located in Kokomo, Ind.; Wyoming, Mich.; Lockport, NY; and Rochester, NY. The Steering operations include manufacturing, engineering and customer service sites in the United States and other locations outside the U.S. Today's agreed transaction with GM Components Holdings LLC supersedes the prior GM Steering Option Exercise Agreement, which had been pending Bankruptcy Court approval and will be withdrawn by Delphi.

Confirmed Plan and Modified Plan Comparison
John Sheehan, Delphi vice president and chief financial officer said that significant challenges in the global automotive and financial sectors - as well as the delay in emergence caused by the actions of the former plan investors in refusing to close on their Investment Agreement in April, 2008 - have caused the business enterprise value of the company to be substantially less than in the previous plan. "Accordingly, distributions to be received by our stakeholders and the currency of such distributions have significantly changed for more senior stakeholders, or have been eliminated for more junior stakeholders, since the confirmation of the Confirmed Plan," Sheehan said.

Pre-Emergence Funding By GM
Under the provisions of an Amended and Restated Delphi-GM Arrangement (which will supersede two prior amendments which had provided for $150 million in pre-emergence liquidity and had been pending Bankruptcy Court approval), GM will be providing Delphi with up to $250 million of pre-emergence liquidity through July 31, 2009 to support Delphi's transformation plan and its plan of reorganization.

Termination of Salaried and Certain Hourly Pension Plans
Sheehan noted that Delphi had achieved its earlier Transformation Plan objective of developing a workable pension solution for its defined benefit plans, which were to have been assumed and preserved under the prior Confirmed Plan. However, the delay in emergence caused by the actions of our former plan investors in refusing to close on their Investment Agreement in April, 2008 -- followed by subsequent historic deterioration in the capital markets and global automotive industry -- have prevented Delphi from being able to fund its defined benefit pension plans for existing retiree and active hourly and salaried employees following emergence from Chapter 11 reorganization.

Accordingly, Delphi's U.S. Hourly Pension Plan will be addressed by GM. Although the Company explored numerous alternatives for its salaried pension plan and other "subsidiary" plans, none were determined to be feasible. Thus, in connection with the Modified Plan, the U.S. Pension Benefit Guaranty Corporation (PBGC) may initiate an involuntary termination of the salaried pension plan and the other "subsidiary" plans and is expected to enter into a settlement with Delphi that will result in the PBGC receiving certain consideration including an allowed prepetition unsecured claim in connection with resolving its claims and other asserted global liens.

Wind-down of Remaining Idled Sites
Delphi will continue the wind-down and disposition of several discontinued operations, primarily located in the United States, through a reorganized entity expected to be called DPH Holdings Co. The sites include: Athens, Ala.; Fitzgerald, Ga.; New Castle, Ind.; Olathe, Kan.; select sites in Flint and Saginaw, Mich.; Clinton, Miss.; select sites in Columbus, Cortland, Dayton, Kettering and Warren, Ohio; a leased facility in Columbia, Tenn.; and Oak Creek Wisc.

Delphi's Chapter 11 cases were filed on Oct. 8, 2005, in the United States Bankruptcy Court for the Southern District of New York and were assigned to the Honorable Robert D. Drain under lead case number 05-44481 (RDD).


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