Delphi Investor Hasn't Pulled Out

Delphi Investor Hasn’t Pulled Out

A key investor in Delphi Corp.'s plan to exit bankruptcy protection says it has not pulled out of the deal as expected by the troubled auto parts supplier. Delphi officials said April 19 that the company had been told that Cerberus Capital Management LP would leave a consortium of investors who would pump up to $3.4 billion into the company in exchange for new shares of Delphi stock. Nearly a week later, Cerberus spokeswoman J.J. Rissi in New York said that has not happened.

From AFX News Limited

DETROIT — A key investor in Delphi Corp.’s plan to exit bankruptcy protection says it has not pulled out of the deal as expected by the troubled auto parts supplier.

Delphi officials said April 19 that the company had been told that Cerberus Capital Management LP would leave a consortium of investors who would pump up to $3.4 billion into the company in exchange for new shares of Delphi stock.

Nearly a week later, Cerberus spokeswoman J.J. Rissi in New York said that has not happened.

"There has not been any decision made," she said Wednesday.

Asked if it was possible that Cerberus would remain part of the deal, she replied, "It’s not impossible," declining further comment.

Delphi had planned to emerge from Chapter 11 by the end of June, but the company said last week that would be delayed until the second half of the year even without the Cerberus withdrawal.

None of the equity investors, including Cerberus, has given notice that it will pull out of the deal, and Delphi and Cerberus are still talking, Delphi spokesman Lindsey Williams said Wednesday.

"They have not issued a termination notice, so all of those discussions would be ongoing," Williams said. "Until we receive a termination notice, they remain a plan investor."

Cerberus was slated to invest up to $1.7 billion in Delphi. If the private equity firm pulls out, Delphi said it is prepared to proceed with the other investors in the group, Appaloosa Management LP, Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities LLC.

Delphi also could replace Cerberus’ capital by adding investors or by using its own cash freed up by repaying unsecured creditors with more stock, the company said last week. Cerberus also could loan Delphi money, Delphi said.

When the investment agreement was announced in December, Delphi said it was contingent on reaching a wage and benefit agreement with labor unions. Delphi has said it can’t compete in a global market because its labor costs are too high.

Negotiations involving the investors, Delphi, General Motors Corp. and the United Auto Workers recently have become strained, with the union rejecting a wage offer that it called insulting and the UAW president threatening a strike if Delphi gets permission from a bankruptcy judge to void its labor contracts.

GM is involved in the talks because it spun off Delphi as a separate company in 1999 and has some financial liability for the company’s labor costs.

The UAW also has been reluctant to grant further concessions sought by Cerberus. It agreed earlier to reduce Delphi’s work force through mass buyouts and early retirement offers and to lowering wages for new workers hired to replace some of those who left.

Industry analysts have said a deal needs to be worked out before national contract talks between the Detroit Three automakers and the UAW formally begin this summer.

Delphi said last year that Cerberus and the other investors would pump $1.4 billion to $3.4 billion into its restructuring.