Judge blocks Platinum expense payout in Delphi deal
NEW YORK (Reuters) - A U.S. bankruptcy judge on Wednesday denied a request from auto supplier Delphi Corp DPHIQ.PK to pay private equity firm Platinum Equity up to $30 million in expense reimbursements if its bid for the company is topped.
At a U.S. Bankruptcy Court hearing in Manhattan, Judge Robert Drain said $30 million was "not reasonable or appropriate," but that his ruling would not preclude Platinum from seeking another kind of expense reimbursement later.
Delphi, which was spun off from General Motors Corp GMGMQ.PK in 1999 and filed for bankruptcy in 2005, said last month that it had reached a deal to sell most of its global operations to private equity firm Platinum Equity, in a plan that with the participation of GM would allow Delphi emerge from Chapter 11 bankruptcy protection.
But in early June Judge Drain ordered Delphi to allow other bidders to compete with Platinum's offer at an auction to be held in late July. That offer included a $3.6 billion financing package for Delphi that would come from various sources including GM and Platinum, people familiar with the matter have told Reuters.
Delphi's lawyers argued that because of the new auction process it needed to offer to reimburse Platinum, should the private equity firm not win the final bid.
But Delphi's debtor-in-possession lenders, who have provided the company with billions of dollars in financing and have considered bidding for it, opposed the request.
The DIP lenders argued that the Platinum offer for Delphi had been negotiated in the last several months. They maintained that the $30 million sum sought stemmed from work done as much as three years earlier.
A lawyer for Platinum argued the firm had spent a lot of time and effort on its bid, and sent employees on extended trips to Delphi headquarters to try to understand how to turnaround the business.
The case is In re: Delphi Corp, U.S. Bankruptcy Court, Southern District of New York, No. 05-44481.
(Reporting by Emily Chasan, editing by Leslie Gevirtz)
