Private Equity Hub – A group of hedge funds that provided bankruptcy funding to Delphi Corp on Monday won a high-stakes auction to take control of the auto parts supplier, scuttling a rival deal brokered by the Obama administration.

Delphi’s board of directors and GM both offered their support for the proposed deal that would hand the company’s assets over to its debtor-in-possession lenders in exchange for their forgiveness of nearly $3.5 billion in loans.

The result, announced by Delphi late Monday, came after a two-day auction in New York.

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New York (HedgeCo.Net) – It doesn’t help matters when a company, who is at the forefront of a government bailout, is expected to provide rescue to another faltering company.  But that’s exactly what General Motors has found themselves in the middle of, as Delphi is again turning to their former parent company for assistance.

GM is in talks to buy back some parts of the Troy, Michigan-based auto parts supplier, including some unprofitable plants.  While this may help Delphi achieve the exit refinancing that they need to emerge from Chapter 11, it certainly doesn’t make things easy on GM, who is already set to receive over $13 billion in government aid.    However, some believe that Delphi’s dependence could help GM’s case in requesting more federal funds.

Since Delphi filed for bankruptcy protection in October 2005, they have faced a string of disappointments in trying to secure the needed capital.  A $6.1 billion refinancing plan, led by hedge fund Appaloosa Management, was supposed to provide the influx of capital.  GM had also promised a $2 billion chunk of the puzzle to ensure Delphi met the minimum requirements.  When the hedge fund backed out of the deal at the last minute, Delphi was left without an alternative.               

GM has agreed to advance up to $100 million this month to Delphi, to keep the company running for the next few months.  Delphi has until Feb 27th to restructure its exit plan, including an amended budget with payouts to creditors and how they plan on becoming profitable following the exit of Chapter 11 protection.  They have also requested that the U.S. Bankruptcy Court allow them to halt their retiree medical benefits.  

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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New York (HedgeCo.Net) – While Delphi continues its quest to secure the capital needed to exit bankruptcy, GM has announced they will increase their loan to the auto parts maker to $950 million.  The extra $300 million will help Delphi maintain some liquidity throughout the process.

Delphi, who sought bankruptcy protection in October 2005, pulled together an exit strategy that included a $6.1 billion influx of capital.  Hedge fund Appaloosa Management took the reins and agreed to provide $2.55 billion to help lift them out of Chapter 11. 

Former parent company GM also came to the rescue and promised a whooping $2 billion piece of the puzzle.  However, Appaloosa proceeded to walk away from the deal during the final days in April, leaving Delphi with no other alternatives.

Delphi took action against the hedge fund in hopes of making it deliver on the promised capital.  The hedge fund bailed amidst what they thought was an increasingly risky situation.  They also were concerned whether or not Delphi has an overreliance on GM.  

Delphi’s next hearing is scheduled for August 26^th in the U.S. Bankruptcy Court in New York.  GM just reported a $15.5 billion quarterly loss, one of the largest in their history.    

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
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