Investment banks launch battle to control Delphi
By Our Corporate Bureau Bureau | 22 Dec 2006
Following a proposal by a group of private equity firms to invest $3.4 billion to help US car parts maker Delphi that had filed for bankruptcy protection, Texas-based Highland Capital Management has proposed a $4.7 billion reorganisation plan for the company.
Earlier in the month, Highland had disclosed a 6.2 per cent stake in the troubled auto parts maker. Analysts interpret this proposal as a signal from the investment bank of its readiness for battle to gain control of the company.
Delphi, once a part of General Motors, had filed for bankruptcy in 2005, a move that had also hurt its former parent and top client.
In the recent past, several other private equity firms and hedge funds firms have either disclosed an interest in Delphi or emerged as potential buyers of the company's assets. They include Appaloosa Management, which has a 9.3 per cent equity holding, Ripplewood Holdings, Harbinger Capital Partners, Wexford Capital, Lampe Conway and DC Capital.
According to reports earlier this week, a group led by Appaloosa Management and Cerberus Capital Management offered to extend $3.4 billion to Delphi in exchange for a large chunk of the company.
Any restructuring deal will need approvals from the bankruptcy court, creditors and unions and GM as well.
Highland says its proposal would be fair to all existing Delphi shareholders, as they would be allowed to take part in a $4.7 billion stock offering of the reorganised firm to finance the plan.
Under the Appaloosa-Cerberus deal, only the private equity firms involved would share in a $1.2 billion stock offering, and they nominate six of the 12 directors at Delphi.
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