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Delphi, GM deal approved by judge

Associated Press / September 26, 2008
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NEW YORK - A bankruptcy judge yesterday approved an agreement between General Motors Corp. and Delphi Corp. that settles what GM will give and get as its former parts subsidiary exits bankruptcy.

Ahead of the hearing, Delphi negotiated changes to appease creditors who had originally objected to the deal. The creditors committee will now get some Delphi shares that would have gone to GM under a $2.06 billion claim. The creditors could get stock worth up to 20 percent of their claims, and GM would get the rest. The terms of the deal change if Delphi does not successfully emerge from court protection intact.

GM is Delphi's former parent. Its role in the parts maker's bankruptcy case grew by necessity when a group of equity investors pulled out of a deal to invest up to $2.55 billion in April.

Delphi and GM then renegotiated the level of GM's financial support as the supplier worked to reformulate its reorganization plan.

Under the new agreement announced earlier this month that covers a wide range of issues, the automaker's financial support of Delphi amounts to $10.6 billion, up from $6 billion in an earlier plan. That includes the assumption of $3.4 billion in pension obligations for hourly workers and $1.2 billion in cash through the end of 2008, as well as legacy labor costs and costs related to attrition and employee transitions.

Delphi's creditors had objected to the GM deal, saying it would give the automaker "extraordinary control" over Delphi's reorganization, hurting creditors in the process.

On Tuesday, Judge Robert Drain approved a plan to freeze pensions for salaried and hourly workers and replace them with new ones.

The changes to the hourly plans require union approval, which the company expects to get by next week. Delphi plans to transfer the $3.4 billion in pension obligations on Monday, ahead of a Tuesday deadline when maintenance of the plans becomes far more expensive.

"This transfer is exactly what we have been urging all along and we are very pleased with this result," said Charles Millard, the director of the government's pension insurer.

"The transfer will significantly reduce Delphi's liabilities to its hourly pension plan, and will eliminate more than $1.2 billion in liens that we filed against Delphi's non-debtor foreign affiliates," Millard, of the Pension Benefit Guaranty Corp., said in a statement.

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