Saturday, June 13, 2009

GM, Delphi, Platinum, Hollywood, and You

This whole "Gummint Motors" thing gets more interesting every day, unless you have to pay for it. Here's a bit of the WSJ article:

GM will provide more than $2.5 billion of the $3.6 billion necessary for Beverly Hills-based buyout firm Platinum Equity to gain control of Delphi, according to a person familiar with the matter.

Since Monday, GM and the government have been mum about who would provide the money to help Delphi emerge from bankruptcy. A GM spokeswoman wouldn’t comment on specific figures but noted in a statement that funding for the Delphi buyout was “incorporated into GM’s revised viability plan.”

IOW, ObamaMotors wants the parts-biz back in the fold, (Delphi is the old Delco/GM Parts) and to get it, they'll use a hedge-fund.

One suspects that the hedgers are not doing this for free, by the way. And DO note that Platinum is based in Beverly Hills. I've heard (cannot verify) that Platinum money comes from Hollywood folk...

Anyhoo.......there are some unanswered questions here.

Delphi has been languishing in Chapter 11 for over four years. That is more than enough time for a whole host of buyers to have kicked the tires and figured out whether it was worth anything. Presumably it’s been found wanting until now. If private capital couldn’t make a case for acquiring the company during that period what is it that has changed and brought about this turn of events.

Oh, but there's more!

The BK judge in the Delphi case doesn't agree that Platinum/GM is the Ordained Buyer.

Judge Robert Drain ordered Delphi to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. “What’s so special about Platinum?” asked Judge Drain. “They’re just guys in suits. Why can’t the other guys in suits just pay more?’

The reason for that? Well, the D-I-P bondholders raised hell (they're kinda like the senior bondholders of the old GM).

Let's go back to that "Hollywood money" question...

The [D-I-P] 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.

The lenders “believe that the GM-Platinum transaction will siphon an extraordinary amount of value from Delphi’s stakeholders to Platinum by offering Platinum rewards incommensurate to its relatively modest investments,” wrote separate lawyers for J.P. Morgan, the agent on a $4.5 billion loan provided to Delphi in 2007 so it could continue to operate under Chapter 11.

This couldn't be a matter of payback, could it?

Kudos to Judge Drain, who obviously doesn't have a family to worry about.

HT: PowerLine