GM Still Expects Delphi Bankruptcy Agreement Possible
Apr 20 2007, 5:10 am GMT
General Motors Corp., the world’s largest automaker, has expressed confidence that an agreement for Delphi Corp., its largest parts supplier, to exit bankruptcy is still possible even as a prospective investor will pull out of the deal. GM is confronting an increased threat of a strike that could topple US production when Delphi Corp. announced that its departure from bankruptcy will not be on schedule as Cerberus Capital Management LP is expected to drop out of a plan to invest $3.4 billion for control of the firm. However, Delphi is still hopeful that other investors are sticking with a plan to pump up to $3.4 billion into the auto parts maker.
The Troy-based Delphi has said it expects that Cerberus Capital Management LP leaving a group of investors that in December pledged to sink capital into the company. A spokesperson for the company further said, ‘Cerberus has not yet terminated. This is an expectation that we have based on conversations’. According to the statement of the company, it becomes very clear that they are trying to attract some potential investors to invest in the company. There might be some chances that Delphi will precede with an investment group of Appaloosa Management LP, Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities LLC.
It is also believed that as the US buy-out group pulls out from the planned deal in the middle of tensions over demands for workforce concessions, Highland Capital Management, a US hedge fund and Delphi’s second-biggest shareholder, has reportedly revitalized a rival bid. In the meanwhile, Delphi indicated that Cerberus would withdraw from a $3.4 billion investment, which is central of its restructuring plan but could contribute to a financing package on its emergence from Chapter 11 protection.
Delphi, which had been hoping to come out from court protection by mid-year, now contemplates to file a reorganization plan by July 31 and depart from bankruptcy later this year. However, the delay may mount more pressure on GM, Delphi’s former parent, to offer additional financial aid. At the same time, though Cerberus has been reconsidering its buyout offer but it seems that it doubts Delphi can generate enough profit to make the investment pay off, revealed by persons close to the negotiations. The reservations emerged after a four-month study of Delphi’s business.
In the meantime, Wall Street Journal has reported that Appaloosa Management intends to move forward with a deal to buy part of Delphi Corp. even with the possibility of a crucial partner dropping out, in a test of private equity’s interest in Detroit’s auto industry.
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