Judge delays ruling on 3.4 billion plan



The plan is supported by GM, the company's labor unions and a committee of unsecured creditors.
NEW YORK (AP) -- Delphi Corp. Executive Chairman Robert S. Miller on Thursday defended a company-approved plan to let five private equity and institutional investors pay as much as 3.4 billion to take a controlling stake in the company.
U.S. Bankruptcy Judge Robert Drain delayed ruling on the plan until today. Objections came from the acting U.S. Trustee, the official committee of shareholders in the case and Highland Capital Management LP, which had submitted a rival bid to buy 4.7 billion in shares in the auto parts maker.
Miller, who was the company's chief executive until Jan. 1, appeared in court after a judge failed to quash a subpoena requiring him to be there. In response to questions, Miller said board members concluded that the offer under consideration was superior to anyone else's at the time it was approved.
"We had a choice to accept what they had proposed," Miller said. "We concluded that proceeding on that basis was preferable ... we weighed all the risk of failure to conclude this, we weighed the risk that they would make a lot of money."
Argument
The equity committee has argued that the investors stood to profit by more than 500 million, some of which would be in fees from a failure to complete the deal.
Miller also said the board has not "foreclosed the possibility of another investor coming up with a superior proposal." He said, "So far we have not seen such a thing."
The company-approved plan would allow affiliates of three private equity investors, Appaloosa Management LP, Cerberus Capital Management LP and Harbinger Capital Partners Master Fund I, as well as Merrill Lynch & amp; Co. and UBS Securities LLC, to buy shares in a restructured Delphi for 1.4 billion to 3.4 billion. It would give the investors a minimum of 30 percent and up to 72 percent of Troy, Mich.-based company but also depends on consensual resolution of its labor agreements by Jan. 31.
Delphi, which filed for bankruptcy protection in October 2005 amid a decline in the American auto industry, employs about 8,000 hourly workers in Ohio.
The plan is supported by General Motors Corp. -- Delphi's former parent and its biggest customer -- the company's labor unions, and a committee of unsecured creditors.
Lawyers for the equity committee and Highland argued that the plan would transfer more than 500 million in value to the plan investors at the expense of current shareholders.
Provisions
Under the plan, an equity committee lawyer said, the investors would be paid a commitment fee and expenses and given a discount on common and preferred shares worth at least 406 million. The plan gives the investors the right to buy at least 40 million shares at 35 a share while the estimated value of shares under the plan is 45.
Equity committee lawyer Bonnie Steingart further argued that the deal was structured to give the investors greater rights than the company to terminate the agreement for "any or no reason." It allows investors to withdraw from the agreement from April 1 until the court approves a disclosure statement for a reorganization plan, which is when the debtor can begin soliciting approval of the plan from creditors.
The plan calls for the company to dissolve 560 million shares and issue 135.3 million new common shares. Current shareholders would divide 3 million shares of the new stock, plus have rights to buy more shares at a discount. Ahead of the hearing, Delphi changed the timing of when those investors would be able to buy new shares. Objectors had argued that the original plan made it more difficult for current shareholders.
Lawyers asked Chief Restructuring Officer John Sheehan about what information was provided to board members and when, in order to determine whether directors were well-informed about the terms of the deal when they approved it.
Steingart asked Miller and Sheehan whether Delphi board members were provided with a summary of the fees, expenses and discount on stock that the plan investors would get under the plan. Miller said he could not recall if directors had received such a summary.
The plan was announced Dec. 18 after more than five months of negotiations, and Highland submitted its offer on Dec. 21, three days later. The board of directors considered the Highland offer and met with its representatives on Jan. 2, but decided on Wednesday to move forward in seeking court approval for the Appaloosa-Cerberus plan.

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