April 5, 2008 in Business

Delphi may need more GM help after deal canceled

Vinnee Tong Associated Press
 

Delphi met deadline

Delphi, which has been in bankruptcy since October 2005, faced a Friday deadline to raise $6.1 billion in loans to help it get out. Delphi followed Appaloosa’s statement Friday with its own, saying it had raised the needed loan money and was ready to do the deal but that Appaloosa had backed down.

NEW YORK – GM didn’t need this.

Besides slumping U.S. sales and a strike that has shut down 30 of its factories, the automaker may now be on the financial hook to help its former subsidiary and largest parts supplier, Delphi. Delphi’s lifeline to exit bankruptcy was stalled after a private equity fund ended a deal for a $2.55 billion cash injection Friday.

The Appaloosa Management-led investment was an essential pillar in Delphi’s reorganization, which has been complicated by a tight credit market.

The loss of the deal puts Delphi Corp.’s plan to exit bankruptcy at risk and raises the issue of whether General Motors Corp. would be forced to offer even more support.

“I would not be surprised to see additional forms of financial support from GM,” Fitch Ratings analyst Mark Oline said. “It’s been never-ending since the initial filing.”

Standard & Poor’s analyst Marc Eiger told investors that the sooner Delphi emerges from bankruptcy, the better off GM will be. He noted that GM recently increased the amount of loan money it offered to Delphi, and it “may need to provide more cash to help Delphi emerge.”

As for an equity deal, Appaloosa said it was still negotiating to invest in Delphi despite its refusal to do so under the terms of the existing agreement.

GM spokeswoman Renee Rashid-Merem said it was disappointed Appaloosa had withdrawn. “There has been a tremendous amount of effort and progress made to establish the foundation that would enable Delphi to emerge from Chapter 11,” she said in a statement.

© Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Get stories like this in a free daily email

Recent stories in Business

Please keep it civil. Don't post comments that are obscene, defamatory, threatening, off-topic, an infringement of copyright or an invasion of privacy. Read our forum standards and community guidelines.

You must be logged in to post comments. Please log in here or click the comment box below for options.

comments powered by Disqus