GM to give over $2.5 bln for Delphi buyout-WSJ

[Omaha Steve]

Source: Reuters

NEW YORK, - General Motors Corp (GM.N) will give more than $2.5 billion of the $3.6 billion needed for Platinum Equity to gain control of bankrupt car parts supplier Delphi Corp (DPHIQ.PK), the Wall Street Journal said, citing a source.

Under terms of the transaction, private equity firm Platinum is expected to invest no more than $750 million and GM would provide the balance in financing, the report said on Thursday, citing the source.

Terms of the GM loans could not be learned, the report added.

Platinum declined to comment. GM and Delphi were not immediately available for comment.

Read more: http://www.reuters.com/article/companyNewsAndPR/idUSN0429267720090605

[virgogal]

1. GM is BUYING something? God,am I confused.

[Omaha Steve]

2. Delphi used to be part of GM

It was spun off. I'm confused too.

[Dover]

3. Soooo...no bailout for Delphi? So where is the money coming from?

The article states:

At that time, a person familiar with the matter told Reuters that the $3.6 billion financing package would come from various sources including GM and Platinum, but declined to elaborate.

As part of the reorganization plan, GM has agreed to acquire five Delphi plants and its global steering business.

GM itself filed for bankruptcy protection earlier this week, the third-largest filing in U.S. history and largest ever in U.S. manufacturing.

GM earlier said a bankruptcy court judge granted approval for it to access a new $33.3 billion debtor-in-possession financing facility from the U.S. Treasury and the Canadian and Ontario governments. (Reporting by Aarthi Sivaraman in New York and Soyoung Kim in Detroit)


What is a debtor-in-possession financing?

A debtor in possession in United States bankruptcy law is a person or corporation who has filed a bankruptcy petition, but remains in possession of property upon which a creditor has a lien or similar security interest. A corporation which continues to operate its business under Chapter 11 bankruptcy proceedings is a debtor in possession.

Under certain circumstances, the debtor in possession may be able to keep the property by paying the creditor the fair market value, as opposed to the contract price. This is often the case where the property is a personal vehicle which has depreciated in value since the time of the purchase, and which the debtor needs in order to be able to find or continue employment to pay off his debts.

Debtor-in-possession financing or DIP financing is a special form of financing provided for companies in financial distress or under Chapter 11 bankruptcy process. Usually, this security is more senior than debt, equity, and any other securities issued by a company. It gives a troubled company a new start, albeit under strict conditions.

[pam4water]

4. Don't most private equity fund run their companies into the ground?