Delphi Gets Funding From Hedge Funds

Date: Tuesday, December 19, 2006
Author: HFN Daily Report

Auto parts maker Delphi announced Monday it would get up to $3.4 billion from hedge funds and investment banks in a bid to emerge from bankruptcy.

Hedge funds Appaloosa, Cerberus and Harbinger are all contributing investments, as are Merrill Lynch and UBS. When Delphi ultimately does emerge from bankruptcy, they could end up with 70% of the company.

The investors have agreed to contribute at least $1.4 billion, which would give them 30% of Delphi. Depending on whether other shareholders and creditors would like to participate in a newly capitalized company, those figures could grow.

As part of the agreement, Appaloosa and Cerberus will each get three seats on Delphi's 12-member board. Robert Miller will be stepping down as chief executive officer and will be replaced by Rodney O'Neal, the company's current chief financial officer.

Delphi's former parent company, General Motors, has also signed on to the deal. The company is also in negotiations with the United Auto Workers, and if the union does not come to an agreement with management by the end of January, the deal could be cancelled.

In any case, Delphi will be shutting down 21 of its 29 plants and laying off tens of thousands of workers.