ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
As previously reported, on November 7, 2008, Delphi Corporation ("Delphi" or the
"Company") filed a motion with the United States ("U.S.") Bankruptcy Court for
the Southern District of New York (the "Court") seeking authority to enter into
an accommodation agreement (the "Accommodation Agreement") allowing Delphi to
retain the proceeds of its existing debtor-in-possession ("DIP") financing
agreement (the "Amended and Restated DIP Credit Facility") consisting of a
$1.1 billion first priority revolving credit facility ("Tranche A" or the
"Revolving Facility"), a $500 million first priority term loan (the "Tranche B
Term Loan") and a $2.75 billion second priority term loan (the "Tranche C Term
Loan"), which otherwise matures on December 31, 2008. On December 3, 2008, the
Court entered an order approving Delphi's motion and authorizing Delphi to enter
into the Accommodation Agreement following the expiration of the applicable
appeal period, assuming resolution of any objections filed in the interim. On
December 12, 2008 Delphi satisfied the closing conditions set forth in the
Accommodation Agreement and the Accommodation Agreement became effective. Under
the Accommodation Agreement, the administrative agent under the Amended and
Restated DIP Credit Facility and the requisite majority of holders of the
Tranche A and Tranche B commitments and exposure under the Amended and Restated
DIP Credit Facility by amount (the "Required Lenders") have agreed to, among
other things, allow Delphi to continue using the proceeds of the Amended and
Restated DIP Credit Facility and to forbear from the exercise of certain
default-related remedies, in each case until the earlier to occur of
(i) June 30, 2009, but subject to the satisfaction of certain conditions below,
(ii) Delphi's failure to comply with its covenants under the Accommodation
Agreement or the occurrence of certain other events set forth in the
Accommodation Agreement and (iii) an event of default under the Amended and
Restated DIP Credit Facility (other than the failure to repay the loans under
the facility on the maturity date or comply with certain other repayment
provisions). However, as referenced above, the outside date of June 30, 2009 for
the accommodation period will be shortened to May 5, 2009 if one of the
following conditions is not satisfied: Delphi either (a) has received binding
commitments, subject to customary conditions, on or prior to February 27, 2009,
for debt and equity financing sufficient for it to emerge from chapter 11
pursuant to the modified plan of reorganization which was filed with the Court
on October 3, 2008, or any other plan of reorganization that provides the
administrative agent and the lenders under the Amended and Restated DIP Credit
Facility with the same treatment as that set forth in the modified plan of
reorganization or (b) has (i) filed, on or prior to February 27, 2009,
modifications to the modified plan of reorganization or any other plan of
reorganization to which the administrative agent does not submit a notice,
within ten business days of such filing, informing Delphi that either (A) the
Required Lenders or (B) lenders party to the Accommodation Agreement holding
Tranche A, Tranche B and Tranche C commitments and exposure representing in
excess of 50% of the Tranche A, Tranche B and Tranche C commitments and exposure
held by all lenders party to the Accommodation Agreement (the "Required Total
Participant Lenders"), affirmatively oppose such modifications or plan of
reorganization (a "Notice"), and (ii) on or prior to March 31, 2009, obtained
entry of the Court's order approving modifications to the disclosure statement
with respect to the modified plan of reorganization, as may have been further
modified, or a disclosure statement with respect to such other plan of
reorganization as described above and the approval to re-solicit or solicit
votes, as the case may be. The administrative agent would submit a Notice if
either the Required Lenders or the Required Total Participant Lenders vote,
within ten business days after the filing of the modifications to the modified
plan of reorganization or the new plan of reorganization, to oppose such plan
modifications (or any such other filed plan of reorganization) on the grounds
that such plan was not acceptable to them. Notwithstanding the Accommodation
Agreement, Delphi is in default of the terms of its Amended and Restated DIP
Credit Facility and is required to file a notice of default upon effectiveness
of the Accommodation Agreement and as a result, Delphi is no longer able to make
additional draws under the facility after December 12, 2008, (the effective date
of the Accommodation Agreement). However, under the Accommodation Agreement,
Delphi is required to continue to comply with the provisions of the Amended and
Restated DIP Credit Facility (as amended and modified by the Accommodation
Agreement). Additionally, prior to the effective date of the Accommodation
Agreement, Delphi was required to and did, (x) replace or cash collateralize, at
105% of the undrawn amount thereof, all outstanding letters of credit under the
Amended and Restated DIP Credit Facility that had not been collateralized prior
to that date ($81 million as of December 12, 2008, of letters of credit that had
not been collateralized previously), and (y) limit the aggregate principal
amounts outstanding under Tranche A borrowings to no more than $377 million. As
of December 12, 2008, there was $370 million outstanding under Tranche A,
$500 million outstanding under the Tranche B Term Loan and $2.75 billion
outstanding under the Tranche C Term Loan. Further, prior to the effectiveness
of the Accommodation Agreement, Delphi was permitted to and did provide cash
collateral, in an aggregate amount not to exceed $200 million, that was pledged
to the administrative agent for the benefit of the lenders ("Borrowing Base Cash
Collateral"). Upon Delphi's request, portions or all of the Borrowing Base Cash
Collateral will be transferred back to Delphi provided that Delphi is in
compliance with the borrowing base calculation in the Accommodation Agreement
and no event of default has occurred.
From and after the effective date of the Accommodation Agreement, applicable
interest rates on amounts drawn will increase by 200 basis points above the
rates currently set forth in the Amended and Restated DIP Credit Facility as
default interest rates apply. In addition, the lenders received as additional
collateral, a pledge of 100% of the equity interests in Delphi's first-tier
foreign subsidiaries (subject to certain perfection restrictions), as compared
to 65% of such equity interests presently
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pledged under the Amended and Restated DIP Credit Facility. Additionally, in
connection with the Accommodation Agreement, Delphi has paid fees to the
consenting lenders of 200 basis points, or approximately $37 million.
The Accommodation Agreement also contains additional covenants, amends certain
of the existing covenants in the Amended and Restated DIP Credit Facility and
includes additional events of default under the Amended and Restated DIP Credit
Facility. Additional covenants under the Accommodation Agreement include (i) a
prescribed minimum borrower liquidity level, (ii) a requirement to repay
obligations under the Amended and Restated DIP Credit Facility pursuant to an
Accommodation Agreement borrowing base covenant, (iii) a requirement to repay
obligations under the Amended and Restated DIP Credit Facility to the extent any
specified litigation proceeds are received in cash, (iv) a prohibition on the
repatriation of cash from foreign subsidiaries as cash dividends, cash otherwise
distributed in redemption of or in exchange for equity interests in foreign
subsidiaries or through the repayment of notes and (v) a requirement to repay
$60 million in obligations under the Amended and Restated DIP Credit Facility in
accordance with the schedule set forth in the Accommodation Agreement.
Changes to covenants under the Amended and Restated DIP Credit Facility include
(i) a reduction in the cap on permitted debt and liens on assets of foreign
subsidiaries, (ii) a reduction in the cap on net cash proceeds from asset sales
before such proceeds must be utilized to repay the obligations under the Amended
and Restated DIP Credit Facility, (iii) modifications to certain debt and lien
baskets, including permitting cash collateralization of letters of credit and an
increase in secured hedging obligations and (iv) enhanced monthly financial
reporting.
New events of default under the Amended and Restated DIP Credit Facility include
(i) any amendment, waiver, supplement or modification to the Amended Global
Settlement Agreement ("GSA") or the Amended Master Restructuring Agreement
("MRA") requiring Court approval that, taken as a whole, materially impairs the
rights of Delphi or its affiliated debtors as borrowers or guarantors,
materially reduces the amount, or decelerates the timing of, any material
payments under either such agreement, if the Required Lenders object, (ii) any
repudiation in writing or termination of the Amended GSA or the Amended MRA by
any party thereto, or a failure to perform any obligation thereunder, which
failure materially impairs the rights of Delphi thereunder, (iii) certain
. . .
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