Delphi Corp., which endured the longest corporate bankruptcy in U.S. history, has filed with the Securities Exchange Commission asking for permission to sell shares through an initial public offering that plays up the company’s potential for growth in China and other overseas markets.
Delphi filed for bankruptcy in 2005 in a bid to scrap what it described as an unsustainable business model that included a heavy reliance on its former parent, General Motors, and a large manufacturing base in the United States. The bankruptcy wiped up Delphi’s old shareholders and left the company’s salaried pension fund in the hands of the Pension Benefit Guarantee Corp.
The Troy-based automotive supplier spent four years under Chapter 11 protection before emerging from bankruptcy in October 2009 with a much smaller manufacturing presence in the U.S. and a focus on supplying high-tech componentry, including safety equipment, fuel-management and electronics.
The new Delphi is now counting on growth in the automotive market in the next few years to impress would be investors.
Global vehicle production is forecast to grow at a compound annual growth rate of 6.8% from 2010 to 2015. In the near-term, the mature markets, including North America and Western Europe, are expected to grow at 3.3%, from 2010 to 2015, for an increase of approximately 6.9 million units, while the emerging markets are forecast to grow at 10.3%, during the same period, for an increase of approximately 22.2 million units.
“We expect that nearly half of our total future growth will be generated from emerging markets, especially China, which now represents a larger market for automotive components than either the United States or Japan. As a consequence of this shift in demand, many automotive manufacturing and supply companies have located operations in China and have entered into strategic partnerships and supply arrangements designed to support increased production,” the documents filed with the SEC said.
“Acquisitions and strategic alliances represent an important element of our business strategy and we believe we have the financial flexibility to pursue these opportunities with our current capital structure and liquidity profile. We believe that there are opportunities to grow through acquisitions, given the trend by OEMs to source globally and from a smaller number of suppliers, and that strategic alliances will allow us to pursue new opportunities faster and with less risk and investment,” Delphi added.
The IPO will be managed by J.P. Morgan and Goldman Sachs, according to the documents filed Thursday with the SEC. Delphi didn’t specify the size of the offering but it is expected to top $100 million, the SEC documents said.
The list of hedge funds and private investment funds preparing to sell shares in what is now London-based Delphi Automotive PLC, includes Paulson & Co., Elliott Associates, L.P. Elliott International, L.P., Silver Point Capital and Oak Tree Capital , the documents , Delphi said.