Court Orders Against Gifting Delphi to Platinum

WSJ reporting that Judge Drain in charge of the GM (GMGMQ.PK) bankruptcy case has ordered Delphi (DPHIQ.PK) to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. Drain's comment with regard to Tom Gores' henchmen is priceless: "What's so special about Platinum?" They're just guys in suits. Why can't the other guys in suits just pay more?"

The Delphi case is the latest in an escalating debate over the Obama administration's attitude toward creditors' rights in bankruptcy court. The federal government has been criticized in both the Chrysler and General Motors Corp. bankruptcies for subverting bankruptcy law, harming senior lenders in order to complete a transaction.

"The rule of law and commercial rights of lenders cannot bend in the face of political forces," said Marc Abrams, a lawyer for a group of the hedge funds, in a standing-room-only courtroom in lower Manhattan Wednesday before Judge Robert Drain.

Virtually all of the remainder of Delphi's assets -- including its Troy, Mich., headquarters -- was to be sold to Platinum Equity, a Beverly Hills, Calif.-based private-equity firm specializing in distressed companies. Platinum is putting in $250 million of equity and $250 million in financing to fund the deal, with more than $2.5 billion of equity and debt being provided by GM. A GM lawyer at the hearing Wednesday estimated the auto maker's total Delphi contribution at $4 billion.

The lenders argued that Platinum was a puppet of the government and GM, which needs Delphi to emerge from bankruptcy for its GM bailout to succeed. Platinum "is an entity funded principally by GM (and thus controlled by the Auto Task Force) in which GM's and the Auto Task Force's hand-picked private-equity buyout partner Platinum provides the appearance of an independent third-party in exchange for disproportionate economic returns," wrote lawyers for a group of lenders in court papers.

Great, more people talking, some posturing here and there and nothing really changing. Rattner will just make a call to Tom, a few side calls to any potential Delphi bidders, and Platinum will end up getting Delphi with a $1 overbid and still "purchase" the company at 10% equity-to-capitalization with the taxpayers footing all the risk and Platinum getting all the upside. The cronyism will likely never change.

Comments

[slowdown:]

Please - get your facts straight before you put to print....The bankruptcy judge overseeing GM is not Drain - he's overseeing Delphi's bankruptcy. U.S. Judge Robert Gerber is the bankruptcy judge that is handling GM's bankruptcy.

Jun 12 11:47 AM

[jgarg:]

Platinum Equity is trying to convince us that they are "uniquely qualified" to run Delphi. But why should we not believe the judge that they are just another group of TARP vultures preying upon the vulnerability of GM. That is what they are - make no mistake.

They believe that, as long as a company produces profits they will hold them (allowing them to "operate" under their ownership), that they are "operations" experts. But in reality they bring absolutely NO operations expertise to any business except accounting.

I don't have a problem with that - but they should not claim that they are "uniquely qualified" to help any particular business unless that business in the the business of buying and selling other businesses.

Jun 12 10:17 PM

[TeresaE:]

The joke is that Delphi is becoming a foreign, or subcontracted, "manufacturer."

So, not only is the government gifting them away-just like Chrysler-the government is assuming all the risk.

Dear gawd, when does this nightmare end?

Oh, that's right, when the only jobs left have been granted by DC, the rest of us will be fighting over WalMart.

Jun 17 01:50 AM

[Miken:]

This will end when American labor rates are once again competitive,i.e., will overcome the freight costs to ship here from a low cost country. Not before. Seems so simple to me, but most people still don't get it. It should be obvious to everyone that American purchases couldn't care less where goods are manufactured...they will buy what they perceive as the greatest value TO THEM.

If Americans don't learn this lesson quickly, the middle class will be toast.


On Jun 17 01:50 AM TeresaE wrote:

> The joke is that Delphi is becoming a foreign, or subcontracted,
> "manufacturer."
>
> So, not only is the government gifting them away-just like Chrysler-the
> government is assuming all the risk.
>
> Dear gawd, when does this nightmare end?
>
> Oh, that's right, when the only jobs left have been granted by DC,
> the rest of us will be fighting over WalMart.

Jul 11 11:53 AM

[Miken:]

With the benefit of hindsight, the objection to the Platinum deal seems to be much ado about nothing. In spite of all the whoopla, NOBODY put in a competing bid.

Hilarious!!

Jul 11 11:56 AM