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February 13, 2008 |
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GENERAL MOTORS: May Have to Fund Delphi's Exit, Investors Say Delphi Corp.'s plan to secure $6.1 billion in financing for its exit from Chapter 11 bankruptcy protection is in jeopardy as bank lenders tried to cope with credit markets that remain virtually shut, The Wall Street Journal says, citing people familiar with the matter. J.P. Morgan Chase & Co. and Citigroup Global Markets, which agreed to arrange funding for Delphi, are having difficulties syndicating the loan to other lenders, the Journal's source said. The Journal's Jeffrey McCracken and John D. Stoll relate that hedge funds and other investors dislike the borrowing terms, saying that they aren't priced appropriately for the risk involved. Investors and others involved in the matter say Delphi's former parent, General Motors Corp., may have to step in and provide financing to fill the gap, the Journal relates. Yet too much GM involvement might spook stock investors, who don't want Delphi too beholden to GM and its price-cutting demands, the Journal says. Fritz Henderson, GM's chief financial officer, has said GM is exploring alternatives in the event Delphi cannot obtain the Chapter 11 exit financing it planned, Dow Jones Newswires say. Mr. Henderson, however, didn't give any details on what kind of alternatives GM was exploring with Delphi and its investor group, Dow Jones notes. "Our objective is to have Delphi exit," Mr. Henderson said in an interview, WSJ notes. "What we've tried to do is be constructive with Delphi and the plan-investors as to how we play a role." GM yesterday reported a $722 million fourth-quarter loss, to end the year a staggering $38.7 billion in the red -- believed to be the largest annual loss ever by an auto maker, the Journal's John Stoll reports. GM recorded a $622 million charge associated with its support of Delphi's restructuring efforts as well as $552 million charge for pension benefits provided to Delphi employees and retirees. KeyBanc analyst Brett Hoselton said in a note to investors Tuesday that GM may have to provide financing itself, Dow Jones reports. Delphi could consider trying to get a smaller exit-financing package, but falling U.S. auto sales and lowered forecasts for GM sales in 2008 "probably mean Delphi needs more money, not less," WSJ quotes a person familiar with Delphi's talks with their lenders. "Any logical person would look at the situation in the U.S. economy and say Delphi needs more," that source told WSJ. As reported in the Troubled Company Reporter on Feb. 4, 2008, Delphi and its debtor-affiliates expect to consummate their First Amended Joint Plan of Reorganization on or before March 31, 2008, Delphi Corp. Vice President and Chief Restructuring Officer John D. Sheehan said in a regulatory filing with the U.S. Securities and Exchange Commission. As reported in the Troubled Company Reporter on Jan. 9, 2008, the Debtors reduced their Exit Financing from the Court-approved $6.8 billion to $6.1 billion. The reduced facilities include: (a) $1.6 billion in an asset-backed revolving credit facility; (b) $3.7 billion in a first-lien term loan facility; and (c) $825 million in a second lien term loan facility. The TCR reported Jan. 30, 2008, that the Honorable Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York permits members of the Official Committee of Unsecured Creditors and the Official Committee of Equity Security Holders appointed in Delphi's bankruptcy cases to participate in any syndicate of lenders assembled to provide exit financing facilities for the Debtors' emergence from Chapter 11. About Delphi Corp. Headquartered in Troy, Michigan, Delphi Corporation (PINKSHEETS: 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 $11,446,000,000 in total assets and $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 confirmed the Debtors' First Amended Plan on Jan. 25, 2008. (Delphi Bankruptcy News; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) * * * As reported in the Troubled Company Reporter on Jan. 16, 2008, Moody's Investors Service assigned ratings to Delphi Corporation for the company's financing for emergence from Chapter 11 bankruptcy protection: Corporate Family Rating of (P)B2; $3.7 billion of first lien term loans, (P)Ba3; and $0.825 billion of 2nd lien term debt, (P)B3. In addition, a Speculative Grade Liquidity rating of SGL-2 representing good liquidity was assigned. The outlook is stable. As reported in the Troubled Company Reporter on Jan. 11, 2008, Standard & Poor's Ratings Services expects to assign its 'B' corporate credit rating to Troy, Michigan-based automotive supplier Delphi Corp. upon the company's emergence from Chapter 11 bankruptcy protection, which may occur by the end of the first quarter of 2008. S&P expects the outlook to be negative. In addition, Standard & Poor's expects to assign these issue-level ratings: a 'B+' issue rating (one notch above the corporate credit rating), and '2' recovery rating to the company's proposed $3.7 billion senior secured first-lien term loan; and a 'B-' issue rating (one notch below the corporate creditrating), and '5' recovery rating to the company's proposed $825 million senior secured second-lien term loan. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/ -- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on Nov. 9, 2007, Moody's Investors Service affirmed its rating for General Motors Corporation (B3 Corporate Family Rating, Ba3 senior secured, Caa1 senior unsecured and SGL-1 Speculative Grade Liquidity rating) but changed the outlook to Stable from Positive. In an environment of weakening prospects for US auto sales GM has announced that it will take a non-cash charge of $39 billion for the third quarter of 2007 related to establishing a valuation allowance against its deferred tax assets (DTAs) in the US, Canada and Germany. As reported in the Troubled Company Reporter on Oct. 23, 2007, Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating and other ratings on General Motors Corp. and removed them from CreditWatch with positive implications, where they were placed Sept. 26, 2007, following agreement on the new labor contract. The outlook is stable. |
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