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Transportation equipment industry

Delphi Corp. Sees Boost with $2.8 Billion Liquidity Infusion

Strategic Insights

— 2 min read

Struggling automotive parts supplier Delphi Corp. has received a much-needed boost, as its newly minted $1 billion term loan B traded into the 103 context, and its bonds also rose from the previous week. The $2.8 billion liquidity infusion, coupled with the hefty coupon of Libor plus 650 basis points on the term loan B, contributed to the debt trading well above par. This development has given Delphi some time to address its major overhaul needs, according to Shelly Lombard, a senior credit analyst with Gimme Credit.

Key Takeaways:

  • Delphi Corp. closed a $2.8 billion credit facility, replacing its $1.5 billion revolver due 2009 and its $1.5 billion 364-day revolver maturing June 17, 2005.
  • The facility consists of a $1 billion, six-year term loan B and a $1.8 billion, four-year revolver priced at Libor plus 500 bps.
  • Delphi initially struggled in syndication, forcing lead banks JPMorgan and Citigroup to flex up pricing on the term loan by 100 bps.
  • The company's bonds have seen significant trading activity, with its 6.5% notes due 2013 jumping 5.625 points from the previous week to trade at 80.625.
  • Delphi made a second contribution of $475 million to fund its US pension plans, bringing its total contributions this quarter to $625 million.
  • The refinancing deal and pension contributions were made possible by the liquidity infusion, which has provided the company with the necessary funds to continue its transformation.
  • Market players attribute the attractive pricing and strong collateral package to the loan's attractive features.
  • Shelly Lombard speculates that some investors who received smaller allocations than they had initially sought will look to buy additional Delphi paper in the secondary market.

Statistics:

  • $2.8 billion: The total liquidity infusion for Delphi Corp.
  • $1 billion: The size of the newly minted term loan B.
  • 103: The context in which the term loan B traded last week.
  • 102.75 to 103.125: The trading range for the term loan B late last week.
  • 650 bps: The coupon on the term loan B.
  • Libor plus 500 bps: The interest rate on the four-year revolver.
  • 5.625 points: The increase in Delphi's 6.5% notes due 2013.
  • 80.625: The trading price of Delphi's 6.5% notes due 2013.
  • $625 million: Delphi's total contributions to its US pension plans this quarter.
  • $475 million: The amount contributed to fund Delphi's US pension plans.
  • June 30: The deadline for Delphi to issue its restated financial statements.

Sources:

  • Bank Loan Report (BLR, 5/30/05)
  • Bank Loan Report (BLR, 6/13/05)
  • Advantage Data

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