Published: July 30, 2009 01:08 am      

BUSINESS: Delphi asking court for bid approval

BY BREE FOWLER

The Associated Press

NEW YORK — A hearing on Delphi Corp.’s plan to hand control of the company to its lenders and eventually end its nearly four-year stay in Chapter 11 got under way Wednesday with arguments from attorneys representing the auto supplier and some of those objecting to the plan.

Hundreds of attorneys and Delphi stakeholders filled U.S. Judge Robert Drain’s Manhattan courtroom, along with two overflow rooms, promising a long day in court for everyone involved. Several high-ranking Delphi executives were also present but were not asked to testify.

Nearly 2,000 objections — including about 1,400 from Delphi workers and retirees worried about the future of their pensions — have been filed against the plan, though many had been resolved before the start of the hearing.

Much of the early part of the day was taken up with procedural activities, though Drain did overrule objections from the Michigan Workers’ Compensation Agency, Texas taxing authorities and Indiana’s Howard County.

In addition, attorneys announced the settlement of objections filed by handful of Delphi’s labor unions, including the United Auto Workers and the IUE-CWA.

Arguments on objections from current and formal Delphi employees were expected to take place following a midday recess. Once all the objections and arguments are heard, Drain is expected to decide whether to approve Delphi’s plan.

Late Monday, Troy, Mich.-based Delphi said that its lenders won out over a California private-equity firm in an auction for the company’s assets. The lenders, led by JPMorgan Chase Bank, agreed to forgive the combined about $3.45 billion in debt owed them by Delphi.

The deal is backed by General Motors Co., which has pumped billions of dollars into Delphi since it filed for Chapter 11 in October 2005 to ensure a stream of parts for its vehicles.

Delphi, which was Detroit-based GM’s parts division before being spun off in 1999, still produces about 10 percent of the parts used in GM’s global production and its components go into nearly all of GM’s North American production lines.

Last month, Delphi agreed to let an affiliate of Beverly Hills, Calif.-based Platinum Equity take control of most of the auto supplier’s businesses with the help of billions from GM.

Delphi’s lenders, which have financed the company’s operations during its years under court oversight, balked at the deal, calling it a “secretly negotiated transaction” that violated Delphi’s obligations to maximize the value of the lenders’ investment. In response, they submitted their own bid, which ultimately won out over the deal with Platinum.

The auto supplier said the agreement with its lenders is similar in structure to the one reached with Platinum in which GM would take back some of Delphi’s businesses, including its Saginaw, Mich.-based steering business, and facilities and help finance the deal.

Delphi said Monday that it has resolved objections filed by several state and federal agencies. If approved, the deal with lenders also will resolve 600 severance-related objections through the assumption and payment of those obligations, Delphi said.

More than 1,400 pension-related objections filed by Delphi employees, retirees and others still remain. Several of the company’s suppliers have also filed objections, but those disputes have been adjourned to a separate Aug. 17 hearing and aren’t expected to affect the outcome of Wednesday’s hearing.