8-KMaterial Agreements

General Motors Co 8-K Report, Material Agreement (Jul 30, 2009)

Filed July 30, 2009For Securities:GM

Summary

This 8-K filing by General Motors Company (GM) on July 29, 2009, details significant agreements related to the acquisition of assets from its key supplier, Delphi Corporation, which was undergoing Chapter 11 bankruptcy proceedings. The core of the announcement is GM's agreement to purchase Delphi's global steering business and specific U.S. facilities, alongside a substantial investment and back-up financing commitment to a new entity, "Acquisition Company," formed to acquire Delphi's remaining assets. This transaction is a crucial step in restructuring GM's supply chain and resolving legacy issues stemming from Delphi's bankruptcy. The filing outlines the terms of a Master Disposition Agreement (MDA) and related financing arrangements. Notably, GM will assume approximately $1.1 billion in Delphi obligations related to its credit facilities and other claims, while waiving approximately $2.15 billion in its own administrative and pension-related claims against Delphi. The company is also investing $1.75 billion in the Acquisition Company, which is being formed with Investors like Elliot Associates and Silver Point Capital. This strategic move aims to secure critical supplier operations and de-risk GM's operational environment in the wake of Delphi's financial distress. The agreement with Delphi's DIP Lenders, approved by the bankruptcy court, represents a more favorable outcome for GM compared to previous agreements. Furthermore, the filing addresses the resolution of Delphi's pension plans, with the Pension Benefit Guarantee Corporation (PBGC) assuming responsibility. GM will honor certain benefit guarantees for specific employee groups and make a $70 million cash payment to the PBGC, along with a share of future distributions from the Acquisition Company. This comprehensive agreement aims to stabilize GM's supply chain, resolve significant financial liabilities, and pave the way for a more stable operational future.

Key Highlights

  • 1GM entered into a Master Disposition Agreement (MDA) to acquire Delphi Corporation's global steering business and four key U.S. manufacturing facilities.
  • 2GM will provide capital investment and back-up financing to a new entity, "Acquisition Company," which will acquire substantially all of Delphi's remaining assets.
  • 3GM will assume approximately $1.1 billion in Delphi's obligations related to its senior and junior DIP credit facilities and other claims.
  • 4GM is waiving approximately $2.15 billion in administrative claims and transferred pension costs associated with its credit agreement with Delphi.
  • 5GM will invest $1.75 billion in cash for Class A Membership Interests in the Acquisition Company.
  • 6The Pension Benefit Guarantee Corporation (PBGC) will assume responsibility for Delphi's U.S. hourly and salaried pension plans, with GM contributing $70 million and a share of future distributions from Acquisition Company.
  • 7The transaction, based on a DIP Lenders' proposal approved by the bankruptcy court, is more favorable to GM than previous agreements with Platinum Equity.

Frequently Asked Questions

The agreement is significant because it allows GM to acquire critical Delphi assets, including its global steering business and key U.S. manufacturing facilities. This helps GM secure its supply chain and resolve complex issues arising from Delphi's bankruptcy proceedings, thereby stabilizing its operational environment.

GM is assuming approximately $1.1 billion in Delphi obligations and investing $1.75 billion in the Acquisition Company. Additionally, GM is committing up to $500 million in a secured delayed draw term loan facility for the Acquisition Company. This is alongside waiving substantial claims against Delphi.

Delphi's U.S. hourly and salaried pension plans are being transferred to the Pension Benefit Guarantee Corporation (PBGC). GM will honor certain benefit guarantees for specific employee groups and will make a $70 million cash payment to the PBGC, along with a portion of future distributions from the Acquisition Company.

Yes, the filing indicates that the current agreement, based on the DIP Lenders' proposal approved by the bankruptcy court, is more favorable to GM than the previously announced agreements with Platinum Equity in June 2009. This suggests improved terms and potentially better financial outcomes for GM.