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January 17, 2008 |
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DELPHI CORP: U.S. Trustee Balks at Exit Loan Participation Diana G. Adams, the U.S. Trustee for Region 2, asserts that members of the Official Committee of Unsecured Creditors and the Official Committee of Equity Security Holders who wish to participate in Delphi Corp. and its debtor-affiliates' Exit Financing should be required to resign from their respective committees. Representing the U.S. Trustee, Alicia M. Leonhard, Esq., in New York, argues that a committee member's participation in the Exit Financing while serving on a statutory committee is inconsistent with that member's fiduciary duties to its constituents. "This dual role creates a conflict of loyalties . . . and gives rise to the appearance that the committee member is personally benefiting from its status as a committee member," Ms. Leonhard tells Judge Drain. The Debtors' allegation that "virtually" all formerly confidential information is public does not the mitigate the effect of the impermissible dual loyalties or the appearance of impropriety, Ms. Leonhard asserts. She notes that in any negotiation, the Exit Lenders and the Statutory Committees will sit on opposite sides of the bargaining table as adverse parties. The Exit Lenders will try to exact as many concessions as possible from the Debtors in light of the tight credit market, but the Statutory Committees should concentrate on obtaining the most favorable terms for the Debtors. Because the interests of the Exit Lenders and the Statutory Committees are in direct conflict, a committee member cannot engage in aggressive negotiations with the Debtors with respect to the contemplated Exit Financing and, at the same time, maintain undivided loyalty and the appearance of fairness to its constituents, Ms. Leonhard maintains. The U.S. Trustee contends that the Debtors may not preclude her from exercising her statutory duties. Section 1102(a) of the Bankruptcy Code vests the U.S. Trustee with the power to appoint and remove members of statutory committees. If the Debtors become aggrieved if the U.S. Trustee removes a committee member for any reason, then they should seek a judicial review of the U.S. Trustee's action after the action has occurred, instead of seeking to constrain a future decision by the U.S. Trustee without any facts, Ms. Leonhard says. The U.S. Trustee thus asks the Court to sustain her objection; and deny the Debtors' request. The U.S. Trustee clarifies that she has no objection to the participation of any committee member in the Exit Financing so long as that committee member resigns from the committee. "Resignation is the only way to maintain the transparency, appearance of fairness and integrity of these cases and the bankruptcy system," Ms. Leonhard avers. Headquartered in Troy, Michigan, Delphi Corporation (OTC: DPHIQ) -- http://www.delphi.com/ -- is the single supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The company's technology and products are present in more than 75 million vehicles on the road worldwide. Delphi has regional headquarters in Japan, Brazil and France. The company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Robert J. Rosenberg, Esq., Mitchell A. Seider, Esq., and Mark A. Broude, Esq., at Latham & Watkins LLP, represents the Official Committee of Unsecured Creditors. As of March 31, 2007, the Debtors' balance sheet showed US$11,446,000,000 in total assets and US$23,851,000,000 in total debts. The Court approved Delphi's First Amended Joint Disclosure Statement and related solicitation procedures for the solicitation of votes on the First Amended Plan on Dec. 20, 2007. The Court will convene the hearing to consider confirmation of the Plan on Jan. 17, 2008. (Delphi Bankruptcy News, Issue No. 106; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) |
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