Delphi scraps deal for bankruptcy financing

DETROIT -- Delphi Corp. said yesterday it has scrapped its agreement with a group of investors that was going to kick in up to $3.4 billion to help the struggling auto parts maker emerge from Chapter 11 bankruptcy protection.

But a spokesman for the company said a revised agreement is expected this month. The move comes after Delphi disclosed in April that one of the key investors, Cerberus Capital Management LP, was expected to pull out of the deal.

"Whenever you have a change in the makeup of that group, it would require a new agreement," said Delphi spokesman Lindsey Williams.

Williams said Delphi's board of directors will meet July 16 to "consider these matters," but he would not say whether a new agreement would be voted on at that time.

Ending the agreement is not expected to stop the company from getting out of Chapter 11 by the end of the year, Williams said.

Delphi said in December that a group of investors led by Cerberus would inject badly needed capital into the Troy, Mich.-based company, the former parts arm of General Motors Corp. until it was spun off in 1999.

But in April the auto parts maker said it had been told Cerberus would pull out of the deal. The move came shortly before Cerberus bought an 80 percent stake in Chrysler Group from DaimlerChrysler AG.

Williams said Delphi never was formally notified that Cerberus had pulled out, but Delphi decided to end the agreement and proceed with a new one.

Without Cerberus, Delphi was left with Appaloosa Management LP, Harbinger Capital Partners Master Fund I, Merrill Lynch & Co., and UBS Securities LLC as the remaining investors.

"It is Delphi's belief that Appaloosa and Harbinger remain committed to a transaction with Delphi that will maximize stakeholder recoveries and permit the company to make an expeditious exit from Chapter 11," Williams said.