Auto parts maker Delphi has agreed to accept up to $3.4 billion (€2.6 billion) in financing from an investment group as the company emerges from bankruptcy.
The investors include Cerberus Capital Management, Appaloosa Management, Harbinger Capital Partners, Merrill Lynch and UBS Securities.
The deal involves the purchase of $1.2 billion in convertible preferred shares and $200 million in common stock. An additional $2 billion will be set aside to buy any common stock left unsubscribed as part of a planned rights offering.
Delphi, General Motors’ former parts maker, filed for bankruptcy protection in October, 2005. The company employs more than 21,000 workers.
The deal involves an agreement to fund approximately $3.5 billion in pension obligations. As much as $2 billion of that amount will be funded by GM.
Current Delphi president Rodney O’Neal will replace Robert Miller as the company’s chief executive officer. Miller will remain chairman.
Representatives of Cerberus and Appalossa will sit on a five-person body to select Delphi’s post-emergence executive chair as well as four independent directors.
Debtor-in-possession financing of roughly $4.5 billion will be provided by JPMorgan Chase Bank.
Appaloosa is a $3 billion hedge fund based in Chatham, New Jersey and led by David Tepper.
Harbinger Capital the distressed affiliate of Harbert Management, a private investment firm with real estate, public equity and private equity strategies. Harbinger is led by Philip Falcone, the former head of high yield trading at Barclay’s Capital.
In April, Cerberus and a private equity unit of Citigroup agreed to acquire a 51 percent stake in GMAC, the financing arm of GM, for $14 billion. Cerberus recently brought on board Kenneth Leet, a former top advisor to Ford Motor, as head of the firm’s European arm.