A Hiccup in Delphi’s Restructuring Plan?

Despite terminating its relationship with Cerberus and other investors, the auto-parts supplier says it's on track to emerge from bankruptcy protection later this year.

Delphi Corp. has terminated its agreement with private-equity firm Cerberus Capital Management and other investors that had promised to help the troubled auto-parts supplier pull itself out of bankruptcy.

Delphi announced the terminated relationship on Monday, nearly six months after a federal bankruptcy judge approved a financing plan between Delphi and affiliates of investors Cerberus, Appaloosa Management, and Harbinger Capital Partners. The investor group had agreed to buy shares in a restructured Delphi for up to $3.4 billion.

Delphi said in April that the company did not expect Cerberus to stay on as an investor for its restructuring plan. Its board of directors will meet on July 16 to consider a new agreement with other investors.

By agreeing in December to the plan, which included Merrill Lynch and UBS Securities as well as the three investment firms, Delphi had passed over a $4.7 billion bid by shareholder Highland Capital Management. Highland, a hedge fund, has owned 8.9 percent of Delphi, including its stock, bonds, and bank debt. The Associated Press speculated that Highland could be the next lead investor in the restructuring plan.

Despite the change, Delphi still expects to file its reorganization plan with the bankruptcy court later this year.

As part of that plan, Delphi is hoping for the court’s approval of an agreement with General Motors and its unions on July 19. The memorandum of understanding between the two companies would end two years of negotiation between them and calls for Delphi to keep four plants in the U.S.

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