GM Coughs Up Dough for Delphi

GM announced on Friday that it will boost its support of Delphi from $6 bln to $10.6 bln in an effort to help Delphi exit bankruptcy (FT). This includes $3.4 bln of pension fund liabilities, up from $1.5 bln previously, and a contribution of $1.2 bln to capitalize the company.

The agreement to increase its funding of Delphi's pension fund liabilities comes days after the PBGC filed a claim on Delphi assets in the bankruptcy court (prior post). The PBGC took this action in part to get GM to actually fund its Delphi-related pension liabilities and the strategy appears to have worked.

Under the terms of the deal, GM will be released from all other Delphi claims. GM said most of its contribution has already been accounted for in the $11 bln the company has taken in charges and writedowns. GM has agreed to cap its unsecured claims against Delphi to $2.5 bln, and to only seek payment after other unsecured creditors receive at least 20% of their claims.

Delphi will seek bankruptcy court approval for the deal on September 23.