GM to Loan Delphi $2.8b
Last July, Delphi agreed to pay GM $2.7b when it emerged from bankruptcy to resolve "long-standing issues." In November, GM said it would settle for $750m in cash and $1.2b in stock AND it would loan Delphi $750m towards the $6.1b needed to exit bankruptcy. And now… GM's agreed to loan their former division another $2.8b. The Detroit News says the new agreement still transfers Delphi stock to GM (now worth $200m less). And Delphi's cash payment to GM shrinks to $175m. Yes, well, five of the six non-GM investors bankrolling Delphi say they'll walk, unhappy with GM's part of the deal. The lead investor, Appaloosa Management, claims the loans are "contrary to Delphi's stated goal of reducing its reliance on and exposure to GM and developing relationships with other (automakers)." And here's the kicker: Delphi has asked the bankruptcy court to force Appaloosa and its partners to continue supporting the restructuring plan. (How to win friends…) Meanwhile, Delphi is still wrangling over providing collateral for some $2b in unpaid pension obligations. They've only put up $150m so far; the Pension Benefit Guaranty Corp. has filed $600m in liens against Delphi's foreign assets. Legally, the PBGC could seize Delphi's foreign ops to satisfy those obligations. Practically, all Hell would break loose.
As an aside, this from the newswires: "British Carlyle Unit Gets Default Notice" One of Carlyle Group's (hedge fund operator) overseas units has been hit with massive margin calls from their bankers. Response: Freeze all redemptions UFN! "Sorry Mr. Buffett, you will not be able to withdraw your money until the fund manager allows it...." While Appaloosa is not Carlyle, this is a very, very bad sign. RF, the GM Death Watch may be nearing resolution. Don your nuclear blast resistant goggles NOW.
Gratz jojo. Business in Michigan is just ugly. Fugly even. I have never shorted anything, but GM is looking like a really ripe target.
This looks like two winos trying to pool their rescources to get one last bottle.