Delphi Corp. said Thursday that it has signed comprehensive settlement and restructuring agreements with former parent General Motors Corp., a major milestone in its nearly two-year quest to emerge from bankruptcy protection.
After reaching the agreement, the Troy, Mich.-based company, the nation’s biggest auto partsmaker, filed a reorganization plan that calls for it to receive as much as $7 billion in bank financing and to exit bankruptcy by Jan. 1.
Delphi’s agreement with GM resolves all outstanding issues between the automaker and supplier, including a lawsuit filed by Delphi to terminate supply agreements with GM, and potential claims and disputes stemming from Delphi’s spinoff.
“This would be what I’d call a bringing it all together,” said Delphi Chief Executive Rodney O’Neal. It “signals the announcement that Delphi believes it has all of its moving parts nailed down and we have a plan that we believe will pass the test and will be confirmed by the court and various stakeholders.”
The agreement with GM follows pacts reached with all six of Delphi’s labor unions and a finalized deal for investors to pump as much as $2.55 billion into the auto parts supplier.
Besides the equity investment, Delphi said Thursday it is working to secure an additional $7 billion to fund pension plans and satisfy other distributions in various bankruptcy cases.
The company is talking with a consortium of banks and hopes to have commitments early in the fourth quarter.
“I think the market will be open to high-quality debt issuers including Delphi,” said Kirk Ludtke, an analyst at CRT Capital Management in Stamford, Conn.
The filing brings to a close a 23-month legal process started Oct. 8, 2005, when then-CEO Steve Miller put Delphi’s money-losing U.S. operations under bankruptcy court protection after failing to receive financial aid from GM and wage concessions from six of its unions, including the United Auto Workers.
A court hearing on the plan is scheduled for Oct. 3, followed by a confirmation session in mid-November, Delphi said.
The plan calls for Delphi to issue new stock and pay GM $2.7 billion in cash to settle all claims the automaker has against the company. GM said in an Aug. 7 filing that it expects retirement and other costs for former GM workers at Delphi to total $7 billion.
Miller, Delphi’s executive chairman, will leave the company once it emerges from bankruptcy. The new Delphi will be governed by a nine-member board of directors, including a newly appointed executive chairman and O’Neal.
Six of the nine board members have to be independent, according to the plan.
Delphi said it plans to make controls and products of a security, electrical, entertainment, communication, powertrain, safety and thermal nature.
