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Miller's Delphi To Borrow $2 Billion
Embattled auto parts maker Delphi (otc: DPHIQ - news - people ) will borrow $2 billion to pay staff and cover daily running costs as it tries to emerge from Chapter 11 bankruptcy protection.
The DIP loan--or "debtor-in-possession" financing--was approved by a bankruptcy judge and will give Delphi time to parley terms with debtors and workers. DIP financing, normally arranged by a company while under the Chapter 11 bankruptcy process, is unique from other financing methods in that it usually has priority over existing debt, equity and other claims. Financing is typically based on the company's perceived value and its ability to draft a reorganization plan.
Delphi, which had a loss of $741 million for the first half of 2005, filed for Chapter 11 protection at the start of October after failing to parley a restructuring agreement with the United Auto Workers union and its former parent, automotive giant General Motors (nyse: GM - news - people ).
Chairman and Chief Executive Robert S. Miller also announced he would reduce his $1.5 million base salary to $1 per year on January 1, 2006; this will continue for as long as it takes for the company to successfully emerge from Chapter 11. Other execs who were at Delphi when Miller joined have also volunteered to waive 10% of their base pay, with President Rodney O'Neal foregoing 20% of his salary.
GM, which said it would underwrite many of Delphi's pension costs, saw its shares fall almost 7% yesterday after receiving a U.S. Securities and Exchange Commission subpoena for documents about its dealings with the parts maker. More … |
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