From Detroit Free Press
Delphi Corp. is working on what it calls "laser-like" changes to its reorganization plan, as the company tries to secure loans it needs to leave Chapter 11 bankruptcy protection.
Delphi opened a hearing Wednesday to ask for permission to begin soliciting votes from creditors on the changes, but asked the judge to delay ruling while it negotiates financing to emerge from court protection, the Associated Press reported.
"As a result of uncertainty of the capital markets, we are engaged in reviewing laser-like potential amendments to the plan," Delphi attorney Jack Butler said at a hearing in bankruptcy court in New York. Butler said the company was making progress on its negotiations, the Associated Press reported.
Butler told the court the financing would be less than the $7.1 billion the company previously sought, according to Dow Jones. That could mean reduced cash payments to the company’s creditors, although Butler said the changes are likely to be small.
The hearing is scheduled to continue Oct. 25.
Butler said Delphi expects to have a financing commitment letter by the end of the disclosure hearing, Bloomberg News reported.
Delphi spokesman Lindsey Williams declined to say what kind of changes the company is considering.
As credit markets tighten, the cost to borrow increases, raising interest payments. If interest payments on the exit financing are more than the company had anticipated, that extra money must come from somewhere, said John Pottow, an assistant professor specializing in bankruptcy at the University of Michigan Law School.
"Most likely, it will come from the bottom rung," he said.
The bottom rung — in the hierarchy of who gets paid in bankruptcy cases — is typically the shareholders.
Delphi made the unusual move of giving shareholders something for their stock. Under the original plan, each current share would fetch a fraction of a share in the reorganized company. While it’s not much, it gives shareholders something for hanging on to their stock through a turbulent time.
In the months leading up to Delphi’s bankruptcy filing, the company’s stock plummeted from more than $5 a share to a little more than a dollar and then to 33 cents after it filed for Chapter 11. On Wednesday, Delphi shares closed down 9.4 percent at 38 cents.
