Reuters
Highland offers rival $4.7 bln Delphi deal
Thursday December 21, 11:07 am ET
By Kevin Krolicki
DETROIT (Reuters) - Highland Capital Management L.P. on Thursday proposed a $4.7-billion reorganization plan for Delphi Corp. (Other OTC:DPHIQ.PK - News), setting the stage for a fight for control of the auto parts supplier between its two largest investors as Delphi emerges from bankruptcy.
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The rival recapitalization plan from Dallas-based hedge fund Highland counters a $3.4 billion equity investment deal Delphi reached this week with a group led by Appaloosa Management LP and Cerberus Capital Management LP.
Delphi, the largest parts supplier to General Motors Corp. (NYSE:GM - News), declined to comment on the new offer.
Representatives of Appaloosa and Cerberus could not be immediately reached for comment.
GM, which spun off Delphi in 1999, depends on the parts supplied by the Troy, Michigan-based company to keep its factories running and has made resolving its remaining labor-related issues with Delphi a top priority.
The initial Delphi recapitalization plan was widely seen as a prod to a faster deal between GM, Delphi and the United Auto Workers Union since the plan set a January 31 deadline for reaching a three-way agreement as a condition for the offer.
By contrast, Highland said it would file its opposition to the Appaloosa-Cerberus plan with the federal bankruptcy court overseeing Delphi's Chapter 11 reorganization by January 2.
In a statement, the hedge fund also indicated that it could ask the court for more time to weigh the rival offers, saying the "compressed timeframe" was not suited to a "a proposal of this complexity and magnitude."
John Novak, an analyst with Morningstar, said the bidding war for Delphi underscored the value unlocked by a restructuring plan that is closing or selling 21 of Delphi's 29 U.S. plants.
Novak said that while the complication of competing bids could slow a final resolution for GM, the outcome would be positive for the automaker in either case.
"I think while the timeline may slip, GM will be fine no matter which side wins," he said.
Highland said it would support the planned exit of Delphi Chief Executive Steve Miller, who joined the parts supplier in mid-2005 to guide its restructuring.
Miller, who became a target of UAW criticism over the course of the bankruptcy process, is scheduled to be succeeded by Rodney O'Neal in January. O'Neal has been Delphi's chief operating officer, with responsibility for daily business operations. Miller will remain chairman.
'SWEETHEART' DEAL?
In a letter to Delphi's board filed with securities regulators, Highland criticized the Delphi recapitalization plan announced on Monday as a "sweetheart" deal that would give control of the restructured company to investors led by Appaloosa and Cerberus through a $1.2 billion preferred stock offering.
"In addition, Appaloosa and Cerberus would have effective control of the board through their right to name six of the 12 directors at Delphi," Highland said in a statement.
With a 9-percent stake, Appaloosa is the largest Delphi investor, while Highland is No. 2 and has a 7 percent stake, according to Reuters Knowledge.
Highland said its offer was preferable since it would scrap the proposed convertible preferred offering in favor of a larger, $4.7 billion rights offering open to all existing shareholders with more than a half percent stake in Delphi.
The Appaloosa-Cerberus investor group also includes Harbinger Capital Partners Master Fund I Ltd., Merrill Lynch & Co. and UBS Securities LLC.
Cerberus has been an active investor in auto-related businesses as many companies in the troubled sector look to sell off assets and restructure.
The private-equity firm last month completed a deal to a 51-percent stake in GMAC. It has also been named as the lead bidder for a unit of bankrupt parts supplier Collins & Aikman (Other OTC:CKCRQ.PK - News), according to a person familiar with the matter.
(Additional reporting by Ben Klayman in Chicago, Caroline Humer in New York)
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