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Delphi Finally Close to Emerging from Bankruptcy

Private equity firm provides the critical mass and capital.

by on Jun.01, 2009

Tom Gores of PlatinumEquity

"We know the business very well and understand its potential."

After spending nearly four years mired in bankruptcy court, Delphi Corporation may finally emerge from behind Chapter 11 protection as an asset of a Los Angeles-based private equity firm rather than under its own control.

Delphi, via a transaction with Parnassus Holdings II, LLC, an affiliate of Platinum Equity, and with the support of GM Components Holdings LLC, an affiliate of General Motors Corporation, has put together a new emergence plan that could stave off liquidation if it works. The President’s Auto Task Force worked behind the scenes to organize the deal.

Platinum is not new to Delphi. Platinum had bid successfully for Delphi’s Steering Gear plant last year but withdrew its bid last winter after the credit crisis made it difficult to obtain financing, but had indicated it was prepared to make another bid when the conditions were right.

This time, however, instead of taking the steering gear business, Platinum will take on all of Delphi’s remaining business.

The most significant development is Platinum will now get control of Delphi’s overseas business, which had not been part of the U.S. Bankruptcy Court proceedings. Parnassus will operate Delphi’s U.S. and non-U.S. businesses going forward with emergence capital and capital commitments of approximately $3.6 billion and without the labor-related legacy costs associated with the North American sites. They are being acquired by GM Components Holding LLC together with Delphi’s global Steering business.

Delphi will continue the wind-down and disposition of several discontinued operations, primarily located in the United States, through a reorganized entity expected to be called DPH Holdings Co. The sites include: Athens, Ala.; Fitzgerald, Ga.; New Castle, Ind.; Olathe, Kan.; select sites in Flint and Saginaw, Mich.; Clinton, Miss.; select sites in Columbus, Cortland, Dayton, Kettering and Warren, Ohio; a leased facility in Columbia, Tenn.; and Oak Creek Wisc.

Delphi Steering was spun off in 1999 as part of GM’s ill-fated spin off of Delphi. It has a 100-year history of innovation as well as comprehensive in-house design and development capabilities.    (more…)