Court Approves Delphi Investment Plan
Financially troubled automotive parts manufacturer Delphi Corporation marked another milestone on its journey back from bankruptcy on August 2. The US Bankruptcy Court for the Southern District of New York gave its consent for the New Jersey based hedge fund Appaloosa Management LP and a number of other investors to inject as much as two and a half billion US dollars into the company. In return Appaloosa and the others will receive preferred and common stock in the reorganised Delphi.
The company is working towards coming out from under the umbrella of Chapter 11 bankruptcy protection – the section of the United States Bankruptcy Code allowing for the reorganisation of a company under bankruptcy court supervision – by the end of 2007, and the August 2 decision will greatly assist to this end. “This was a huge milestone,” said Delphi chairman Robert S. (Steve) Miller, “A lot of the heavy lifting is done.”
Appaloosa and its partners will purchase US$800 million in convertible preferred shares and about $175 million of common stock, and have also agreed to acquire any shares remaining following a $1.6 billion rights offering to Delphi’s existing common stockholders. “We’ll get this company out of Chapter 11 as quickly as possible so it can resume its business in the real world,” said Tom Lauria, an attorney for Appaloosa.”
However it appears that the parts manufacturer is not yet entirely out of the woods. While Delphi and the largest union representing company employees recently agreed to reduce the wages of long-serving employees by between a third and a half, two of the six unions representing Delphi workers have not come to any agreement with the company. Delphi’s second-largest union, the International Union of Electronic Workers-Communications Workers of America, said it is considering strike action against the company.