Delphi Buys Out GM, PBGC Interests

March 31, 2011 ( - Delphi Automotive LLP has purchased the Class A interests owned by General Motors Company (GM) for $3.8 billion and the Class C interests owned by the Pension Benefit Guaranty Corporation (PBGC) for $594 million.


According to a press release, these transactions, funded with cash on the company’s balance sheet and $2.5 billion of new bank debt as part of a $3.0 billion credit facility provided by J.P. Morgan Securities LLC, fully retire the ownership shares acquired by GM and the PBGC in connection with Delphi’s acquisition by a group of private investors in October 2009.

“These transactions represent an important step in positioning Delphi to continue to increase shareholder value,” said Rodney O’Neal, Delphi president and chief executive officer. “We continue to have significant financial flexibility and remain committed to pursuing opportunities that drive value creation.”

PBGC originally obtained its interest in Delphi Automotive in partial settlement of its claims stemming from the 2009 termination of pension plans of the bankrupt company.  Since 2009 PBGC has been responsible for paying pension benefits to some 70,000 Delphi workers and retirees.  The Delphi pension plans were underfunded by about $7 billion and PBGC has taken responsibility for $6.1 billion, making it the second largest financial loss in the agency’s 36-year history.

According to a PBGC press release the agency doesn’t know how this action will affect benefits, but says it will inform Delphi retirees of their final benefit amount as soon as the complex calculation process is complete.