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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Tags: assets, auction, auto-parts-supplier, bankruptcy, board-of-directors, debtor in possession, delphi, delphi-corp, forgiveness, gm, hedge funds, hub, lenders, loans, obama, rsquo, s board

Reuters – Hedge funds that provided bankrupt U.S. auto parts maker Delphi with debtor-in-possession (DIP) financing are not getting access to the firm’s books, hindering their ability to make a takeover offer, the New York Post reported, citing a person familiar with the situation.

The lenders are led by hedge fund Elliott Associates, the paper said.

In case they do not get access to Delphi’s books soon, the lenders may approach the judge handling the bankruptcy case to intervene, a source told the paper.

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Tags: auto parts, bankruptcy case, debtor in possession, delphi, elliott associates, hedge fund, hedge funds, lenders, new york post, reuters, s-books, takeover, u s auto

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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