HedgeCo.Net (West Palm Beach) – Bankrupt auto parts maker Delphi may have to look elsewhere in their quest to secure $6.1 billion in exiting financing. While a deal was originally struck with Appaloosa Management, the continuing credit crisis is causing investors to think twice.
Delphi’s earlier attempts to secure loans from major banks never materialized due to the slump in sub-prime mortgage securities. The mistrust of high-yield, high-risk debt has left banks with about $160 billion of outstanding loans.
The “volatility of the financial markets has impacted our ability to complete our financing activities earlier in the year,” Delphi spokesperson Lindsey Williams explained.
General Motors, Delphi’s parent company, then turned to New-Jersey based Appaloosa Management, along with other prominent hedge funds. Appaloosa agreed to lead the investments, with a guarantee of $2.55 billion.
Merrill Lynch, UBS AG, Goldman Sachs, Harbinger Captial Partners, and Pardus Captial Management agreed to provide the rest of the money needed for Delphi to exit bankrupty. If the financing is not complete by the end of March, GM may have no choice but to step up to the plate.
While some of the financing is already complete, Appaloosa can legally pull out of their agreement if Delphi fails to exit bankruptcy by March 31.
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: julie@hedgeco.net
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