US $ help private firm buy Delphi

* JUNE 5, 2009

Investor Firm to Tap GM's Fresh Billions to Buy Delphi

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By PETER LATTMAN

Flush with $30 billion in new capital from the U.S. government, General Motors Corp. has agreed to finance a private-equity firm's buyout of bankrupt auto-parts company Delphi Corp.
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GM will provide more than $2.5 billion of the $3.6 billion necessary for Beverly Hills-based buyout firm Platinum Equity to gain control of Delphi, according to a person familiar with the matter.

Since Monday, GM and the government have been mum about who would provide the money to help Delphi emerge from bankruptcy. A GM spokeswoman wouldn't comment on specific figures but noted in a statement that funding for the Delphi buyout was "incorporated into GM's revised viability plan."

GM's involvement represents new ground in its use of government support. The Obama administration has begun to use private-equity firms to take over failed banks but has yet to use them in the auto industry.

Such transactions can prove hugely profitable for a buyer, depending largely on financing costs and the buyer's ability to turn around the business.

Under the terms of the transaction, Platinum is expected to invest no more than $750 million, according to the person familiar with the deal. GM would provide the balance in financing.

Those financing commitments may or may not be drawn upon in the future, depending on how Delphi performs. The terms of the GM loans couldn't be learned.

As part of the deal, GM is buying back four Delphi plants and Delphi's Saginaw, Mich., global steering division. In addition, it's providing a $250 million loan to fund Delphi's operations while it remains in Chapter 11.

The Delphi rescue is a turnabout for GM. Delphi has languished in bankruptcy court for nearly four years, and it has been an enormous cash drain on GM. Earlier this year, GM said it wasn't interested in propping up the auto-parts maker any further.

Platinum is controlled by Tom Gores, a Michigan native who has recently made several acquisitions in the auto sector. Earlier this month his firm announced a deal to acquire Alcoa Inc.'s wire-harness and electrical-distribution business, based in Farmington Hills, Mich. Platinum also owns Acument Global Technologies, a fastening manufacturer in Troy, Mich.

The Platinum deal must still be approved by the bankruptcy court. GM has said that if the company doesn't get that support, it will try to complete the transaction through a sales process under the U.S. Bankruptcy Code.