Delphi judge indicates plan to approve lender bid

[July 30, 2009]  NEW YORK (AP) -- The judge overseeing Delphi Corp.'s bankruptcy case is expected to rule Thursday on the auto supplier's plan to hand control of the company to its lenders and eventually end its nearly four-year stay in Chapter 11.

After an eight-hour-long court session Wednesday in which nearly all objections to Delphi's plan were either withdrawn or dismissed, U.S. Judge Robert Drain indicated that he will approve the plan.

"To me it seems like a valid exercise of business judgment," he said.

The judge is expected to rule on a remaining minor dispute Thursday morning. The hearing is set to reconvene at 10 a.m. EDT Thursday and include a closing presentation from Delphi's attorneys.

If the plan is approved it would pave the way for Delphi to soon emerge from bankruptcy protection. The company has set a target date of Aug. 31 and expects to be out of Chapter 11 by Sept. 30, Delphi attorney Jack Butler said.

Hundreds of attorneys and Delphi stakeholders filled Drain's Manhattan courtroom, along with two overflow rooms, for Wednesday's hearing. Several high-ranking Delphi executives were also present but were not asked to testify.

Nearly 2,000 objections -- including about 1,400 from Delphi workers and retirees worried about the future of their pensions -- were filed against the plan, though many had been resolved before the start of the hearing.

After lengthy arguments from their attorneys, Drain dismissed objections from the Michigan Workers' Compensation Agency, Texas tax authorities and Indiana's Howard County, along with a trio of labor unions who represent retirees whose pension benefits could be reduced as a result of the plan.

Objections filed by handful of Delphi's labor unions, including the United Auto Workers and the IUE-CWA, were settled Wednesday.

Late Monday, Troy, Mich.-based Delphi said that its lenders won out over a California private-equity firm in an auction for the company's assets. The lenders, led by JPMorgan Chase Bank, agreed to forgive a combined $3.45 billion in debt owed them by Delphi.

The deal is backed by General Motors Co., which has pumped billions of dollars into Delphi since it filed for Chapter 11 in October 2005 to ensure a stream of parts for its vehicles.

Delphi, which was Detroit-based GM's parts division before being spun off in 1999, 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.

Last month, Delphi agreed to let an affiliate of Beverly Hills, Calif.-based Platinum Equity take control of most of the auto supplier's businesses with the help of billions from GM. But Delphi's lenders, which have financed the company's operations during its years under court oversight, balked at the deal, calling it a "secretly negotiated transaction" that violated Delphi's obligations to maximize the value of the lenders' investment. In response, they submitted their own bid, which ultimately won out over the deal with Platinum after an 18-hour auction process that ended on Monday.

Butler said after Wednesday's hearing that talks between the auto supplier and Platinum continue. Delphi on Thursday plans to ask Drain to approve a $30.5 million payment to Platinum to compensate them for their expenses.

Delphi said the agreement with its lenders is similar in structure to the one reached with Platinum in which GM would take back some of Delphi's businesses, including its Saginaw, Mich.-based steering business, and facilities and help finance the deal.

The exact details of the credit bid, which isn't a public document, have not been released.

[Associated Press; By BREE FOWLER]

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