Judge OKs shift of some Delphi assets to new GM

By BREE FOWLER

posted: 138 DAYS 1 HOUR AGO

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NEW YORK -A bankruptcy judge on Monday approved a deal that could shift some of auto parts supplier Delphi's assets to General Motors Co., which emerged from Chapter 11 bankruptcy protection last week.

U.S. Judge Robert Gerber, who is overseeing the liquidation of Motors Liquidation Co., the collection of assets and liabilities left over after the sale of prized GM assets to a new company, gave his approval to the deal, allowing GM and an affiliate of Platinum Equity to buy the bulk of Delphi's assets and help the auto supplier emerge from bankruptcy protection.

All of the assets and costs related to the agreement will transfer to the new GM and not affect the finances of "Old GM" or the possible returns for the old company's creditors, GM attorney Robert Lemons told the court.

The agreement could help save Delphi Corp. from liquidation, but still hinges on the consummation of a deal between the Troy, Mich.-based auto supplier, the new General Motors and Platinum.

As part of deal reached in June, Beverly Hills, Calif.-based Platinum will be allowed to operate Delphi's businesses both in the U.S. and abroad. Detroit-based GM will contribute a total of about $3.9 billion, including a $2 billion equity investment in Platinum, to help finance the deal. Platinum will contribute a maximum of $500 million in financing.

In exchange, GM will get certain parts of Delphi, including its Saginaw, Mich.-based steering business, and assurance of a steady supply of many of the parts it needs to produce its cars and trucks. Other "noncore" plants and assets will be sold off over time.

Delphi, which was GM's parts division before being spun off in 1999, filed for Chapter 11 protection in October 2005. It still produces about 10 percent of the parts used in GM's global production and its components go into nearly all of GM's North American production lines.

At the same time, GM is Delphi's largest customer and the automaker's business is crucial to its survival.

But some Delphi lenders, who have been funding the company's operations under bankruptcy protection, have objected, calling the deal with Platinum a "secretly negotiated transaction" that violated Delphi's obligations to maximize the value of the lenders' investment.

Meanwhile, Platinum has maintained that Delphi was forced to look for funding elsewhere because the lenders didn't provide enough, and that its offer remains the best option for Delphi.

No other parties have stepped forward with a bid to buy Delphi, but the lenders have until Thursday to submit their own bid. If they do, an auction will take place the next day in front of U.S. Judge Robert Drain, who is overseeing Delphi's case, to determine which bid is superior.

A hearing on the sale of Delphi's assets is scheduled for July 23. If a sale is approved, the company has said it could emerge from Chapter 11 later this summer.

2009-07-13 14:22:13