Delphi, GM reach agreements to supplement Delphi's liquidity, complete steering business sale

By Caroline Salls

Pittsburgh, March 3 - Delphi Corp. has reached several agreements with General Motors Corp. designed to supplement Delphi's liquidity and to substantially complete its portfolio transformation through the sale of its global steering business, according to a Delphi news release.

"As stated in GM's Feb. 17 filing with the U.S. Dept. of the Treasury, Delphi represents an important source of supply for GM," Delphi vice president and chief financial officer John Sheehan said in the release.

"This financial commitment by GM represents an important and necessary step for Delphi to be able to access additional liquidity to manage its U.S. operations while providing the company with the liquidity runway to complete discussions with stakeholders and obtain court approval of reorganization plan modifications."

Under two amendments to GM's liquidity advance agreement with Delphi, GM has agreed to increase the amount it is committed to advance to Delphi to $450 million from $300 million, subject to several conditions, including bankruptcy court approval and review by March 24 by the president's designee in accordance with the provisions of GM's federal loans.

Steering business purchase option

In addition, Delphi and GM have entered into an agreement under which GM will exercise its option to purchase Delphi's steering business provided under a September 2008 master restructuring agreement.

Delphi said it had earlier entered into a purchase and sale agreement with an affiliate of Platinum Equity, LLC, but that agreement has been mutually terminated.

According to the release, GM and Delphi are committed to work together to provide non-GM customers of the steering business with the continued supply of products and services following the sale.

Additionally, Delphi said it is committed to providing general transition services to GM through mid-2011 and information technology transition services through December 2012.

Delphi and GM have also agreed to attempt to close the steering business sale by April 30 and to achieve other milestones, which are also subject to bankruptcy court approval.

Delphi said it believes that GM's commitment of additional liquidity coupled with the support it has received from its lenders under its debtor-in-possession financing facility, should allow Delphi to manage its liquidity into May as it continues emergence discussions with its stakeholders on the proposed plan of reorganization confirmed in January 2008.

Site transfer talks

The company said it is working with GM to negotiate an arrangement under which Delphi would transfer to GM some of its U.S. manufacturing sites dedicated primarily to supply products to GM in exchange for a payment that is expected to facilitate Delphi's emergence from Chapter 11 bankruptcy.

Delphi said these manufacturing sites represent less than 3% of its global manufacturing operations.

As part of these negotiations, Delphi and GM are seeking to finalize modifications to their previous agreements as part of the April 2 milestone for Delphi's filing of reorganization plan changes.

Cash collateral use

In addition to the agreements reached with GM, Delphi said its agreements with participating DIP lenders will also allow the company to access up to $117 million in restricted cash collateral, provided that it remains in compliance with all mandatory prepayment provisions and other covenants in the accommodation agreement and the DIP borrowing base supports the company's use of some or all of the cash collateral.

The cash collateral use also requires Delphi to achieve the remaining specified milestones in its reorganization cases, including the filing of a plan of reorganization or changes to its existing plan by April 2 and GM obtaining all required approvals to increase the available amounts under the GM advance agreement to $450 million by March 24.

Delphi said GM's agreement to increase the amounts available under the advance agreement and to seek any required governmental approvals is a significant step in satisfying these conditions.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-44481.

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