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Delphi, investors extend termination rights

From Reuters| March 05,2007

Delphi Corp. and an investor group will stick with a $3.4 billion bankruptcy emergence plan for at least two weeks beyond a deadline triggered by failure to reach deals with General Motors and its unions, Delphi said.

Delphi and the investor group led by Cerberus Capital Management LP and Appaloosa Management LP previously had to decide by Wednesday, Feb. 28, whether to terminate the deal before facing potential fees for backing away from the deal.

The Feb. 28 deadline was triggered when Delphi failed to reach agreements with GM, its former parent and still its largest customer, or its unions by the end of January.

Delphi and the investor group both had the right to walk away from the deal in the past month, but did not. The deal would give the Cerberus and Appaloosa led group a controlling stake in the reorganized company.

Delphi, Cerberus and Appaloosa agreed not to exercise the termination right before March 15 and set no new deadline date, Delphi said. After that, either side could walk away from the agreement or call for re-establishing a deadline, it said.

Should the termination deadline pass, Delphi could be required to pay the investor group up to $100 million if the parts maker chooses a different investment route.

Delphi remains in talks with GM and its unions on various issues. It needs to reach final agreements with GM on the scope of its liabilities for the costs of Delphi's U.S. union work force that it inherited from the automaker, among other issues.

Delphi needs to reach agreements with its unions on wages and benefits, plant closings, plant sales and other issues.

Delphi, which filed for bankruptcy in October 2005, plans to cut four-fifths of its U.S. union work force, more than two-thirds of its U.S. union plants, thousands of salaried jobs worldwide and several business lines to reorganize.

The maximum liability for Delphi or the investors would be $100 million if they walk away before the bankruptcy court approves a disclosure statement, which is required for Delphi to seek creditor approval of its reorganization.

That liability expands to up to $250 million for either side once the court approves the disclosure statement. The deal requires Delphi to file a disclosure statement by May 1.

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