DETROIT – Delphi Corp. said Monday it has formally killed a proposed equity investment led by Cerberus Capital Management LP and expects to complete a new plan and outline for creditor recoveries by the end of July.
Delphi, which filed for bankruptcy in October 2005, had said in April that it expected Cerberus to withdraw and would make changes to the investment plan, one of several key steps the auto parts maker must complete to exit court protection.
Delphi terminated the $3.4 billion equity investment plan on Saturday. Cerberus, which is buying Chrysler Group from DaimlerChrysler AG (DCX), was a co-lead investor in the plan with Appaloosa, Delphi's biggest shareholder.
The developments are not expected to prevent Delphi from exiting bankruptcy this year and Delphi's board is scheduled to meet July 16 to consider the matters, it said.
CRT Capital Group analyst Kirk Ludtke called the expected timing of a new agreement encouraging and said the scheduled board meeting implied a new framework was largely complete.
"While it is unclear why Delphi moved to formally terminate the framework agreements at this time, we suspect it is largely a formality necessitated by Cerberus' withdrawal and the need to resubmit an updated proposal," Ludtke said in a note.
Ludtke said the new group is likely to consist of the four remaining original plan investors, potentially with others to replace the Cerberus portion in part or whole.
Delphi did not disclose who the potential new equity investors could be, though it believes that Appaloosa and Harbinger Capital remain committed to participating in a plan.
Highland Capital Management, the second-largest Delphi shareholder after Appaloosa, also has signed a confidentiality agreement with Delphi to explore an investment. Delphi rebuffed a prior Highland investment offer in early 2007.
However, Highland approached Delphi about preparing an alternative investment plan as it became apparent that Cerberus would withdraw and has said it was meeting with Delphi and former Delphi parent General Motors Corp. (GM).
Pardus Capital Management, which holds large stakes in Visteon Corp. and France's Valeo also may be considering a potential investment.
Several other items must come together for Troy, Michigan-based Delphi to complete its reorganization, including comprehensive deals with former parent General Motors Corp. and its unions.
Delphi plans to incorporate a full GM settlement into a reorganization plan rather than seek separate approval from the U.S. Bankruptcy Court in New York, it said on Monday.
Delphi reached agreement with the United Auto Workers on wage cuts, benefit cuts, plant closings and business unit sale plans in June. The UAW's 17,000 Delphi members ratified the deal and Delphi will seek court approval later in July.
The deal with the UAW, by far Delphi's largest union, is seen as a likely template for talks with other unions. Delphi is negotiating now with its second and third largest unions.
Delphi hopes to complete deals with the other unions in time to seek seek court approval in mid August.