Delphi Nears Deadline to Get Exit Loans

Auto parts maker Delphi Corp. faces a Friday deadline to get the loans it needs to exit bankruptcy, and at the same time, former parent General Motors Corp. is said to be in talks to take an even greater share of its pension obligations. Delphi needs to secure $6.1 billion in exit financing to meet the requirements of a plan by investors to invest as much as $2.55 billion in the reorganized company. A Delphi lawyer said earlier this week that the company expects to get the loans it needs in time.

From AFX News Limited

NEW YORK — Auto parts maker Delphi Corp. faces a Friday deadline to get the loans it needs to exit bankruptcy, and at the same time, former parent General Motors Corp. is said to be in talks to take an even greater share of its pension obligations.

Delphi needs to secure $6.1 billion in exit financing to meet the requirements of a plan by investors to invest as much as $2.55 billion in the reorganized company. A Delphi lawyer said earlier this week that the company expects to get the loans it needs in time.

The Appaloosa Management LP hedge fund is leading a group of investors who will take equity in Delphi in exchange for the $2.55 billion. The group includes Harbinger Capital Partners Master Fund I Ltd.; Merrill Lynch, Pierce, Fenner & Smith Inc.; UBS Securities LLC; Pardus Capital Management LP; and Goldman Sachs Group Inc.

If Delphi gets the loans it needs by Friday [today], it could finally learn whether the investment group will move forward to invest the money and takes its stake in the company.

Also, GM may increase how much it will contribute to defray Delphi’s pension obligations, according to a person who is familiar with the negotiations but asked not to be identified because he wasn’t authorized to speak on the subject.

The automaker has agreed to take on $1.5 billion in pension obligations, according to a court filing last month. Delphi was $3.8 billion short of being able to fully fund pensions for its hourly workers as of the end of 2007. An increase in GM’s contribution would reduce the government’s role and be better for workers who hold the pensions.

Delphi spokesman Lindsey Williams declined to comment Thursday on the negotiations. A GM spokeswoman also declined to comment.

If Delphi fails to emerge from Chapter 11, the government’s Pension Benefit Guaranty Corp. could force Delphi to involuntarily terminate its pension plans. That would mean Delphi would have to pay its missed contributions as well as possible penalties on the missed contributions to the IRS. So far, Delphi has obtained the necessary waivers to try to exit bankruptcy before that would happen. The PBGC is the government agency that backstops company pension plans.

Troy, Mich.-based Delphi has been operating in bankruptcy protection since October 2005.