A new deal between Delphi Corp. and General Motors Corp. was approved by a U.S. Bankruptcy Court judge today, increasing the amount of pension liability GM will assume for Delphi’s hourly workers’ plan to $3.4 billion, up from $1.5 billion.
U.S. Bankruptcy Court Judge Robert D. Drain also approved a new agreement in which Detroit-based GM would be among the first creditors to be repaid when Delphi emerges from Chapter 11 bankruptcy protection. GM will share with unsecured creditors a portion of a $2 billion stock and/or cash grant from Delphi so creditors will recover at least 20% of their Delphi investment.
If Delphi does not come out of bankruptcy, GM will receive a priority $2 billion claim from Delphi, but will share 50% of those proceeds up to $300 million with other unsecured creditors.
On Tuesday, the New York-based judge gave Troy, Mich.-based Delphi permission to freeze its U.S hourly and salaried defined benefit plans, which total $15 billion, pending union approval on the hourly plan.
In an e-mail sent from outside the courtroom, Lindsey Williams, a Delphi spokesman, wrote: “Delphi achieved a major milestone in its Chapter 11 cases this week by obtaining court approval on each of the motions filed by the company” and noted that Mr. Drain’s approval “position(s) the company to proceed with the remaining elements of its reorganization.” Mr. Williams said Delphi plans to emerge from bankruptcy protection “as soon as practicable.”
Charles E.F. Millard, director of the Pension Benefit Guaranty Corp., applauded the agreement in a statement today. “This pension transfer is a victory for Delphi’s workers and retirees, and represents a major step toward a successful reorganization for Delphi,” he said in the statement. “We applaud Delphi and General Motors for their leadership in crafting an agreement that addresses the concerns of Delphi’s stakeholders. We will continue to work with all stakeholders to support Delphi’s restructuring efforts.”
