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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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| Date of report (Date of earliest event reported)
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August 31, 2007 |
Delphi Corporation
(Exact Name of Registrant as Specified in Its Charter)
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| Delaware
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1-14787
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38-3430473 |
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(State or Other Jurisdiction of
Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.) |
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| 5725 Delphi Drive, Troy, MI
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48098 |
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| (Address of Principal Executive Offices)
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(Zip Code) |
(248) 813-2000
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01 OTHER EVENTS
Delphi Corporation (“Delphi” or the “Company”) disclosed in its Quarterly Report on Form 10-Q for
the quarter ended June 30, 2007 that the Company, along with Delphi Trust I and Delphi Trust II
(subsidiaries of Delphi that issued trust preferred securities), certain current and former
directors of the Company, certain current and former officers and employees of the Company or its
subsidiaries, and others are named as defendants in several lawsuits that were filed beginning in
March 2005 following the Company’s announced intention to restate certain of its financial
statements. The categories of lawsuits include: (i) class action lawsuits, brought by persons or
entities who purchased or acquired publicly-traded Delphi securities during the period of March 7,
2000 through March 3, 2005 (the “Securities Actions”); (ii) class action lawsuits, brought by
certain plaintiffs under the Employee Retirement Income Security Act (“ERISA”) on behalf of
participants in certain of the Company’s and its subsidiaries defined contribution employee benefit
pension plans that invested in Delphi common stock (the “ERISA Action”); (iii) lawsuits comprised
of shareholder derivative actions against certain current and former directors and officers of the
Company (the “Shareholder Derivative Actions”). On December 12, 2005, the Judicial Panel on
Multidistrict Litigation entered an order transferring each of the Securities Actions, ERISA
Action, and Shareholder Derivative Actions to consolidated proceedings (the “Multidistrict
Litigation” or “MDL”) before the United States (“U.S.”) District Court for the Eastern District of
Michigan (the “U.S. District Court”). As of June 30, 2007, the Company’s best estimate of liability
for these matters was $340 million, excluding any insurance proceeds that may be recoverable under
Delphi’s insurance policies.
On July 11, 2007, the U.S. District Court appointed the Honorable Layn R. Phillips, former United
States District Judge, as a special master for settlement discussions. Through mediated settlement
discussions, on August 31, 2007 representatives of Delphi, Delphi’s insurance carriers, its
statutory committees in its chapter 11 proceeding, and certain other named defendants involved in
the MDL proceedings, were able to reach an agreement with the lead plaintiffs in the Securities
Actions (“Lead Plaintiffs”) and the ERISA Action plaintiffs (“ERISA Plaintiffs”) resulting in a
$361 million settlement of the Multidistrict Litigation (the “MDL Settlements”).
On September 5, 2007 the U.S. District Court entered an order preliminarily certifying the class
and approving the settlement and scheduled the matter for a fairness hearing on November 13, 2007.
The U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) is
expected to hear the Company’s motion for approval in late September. The following is a summary
of the principal terms of the MDL Settlements as they relate to the Company and its affiliates and
related parties and is qualified in its entirety by reference to the complete agreements to be
submitted to the Bankruptcy Court for approval, attached as Exhibits 99(a), (b) and (c) to this
report and incorporated herein by reference.
Under the terms of the MDL Settlements, the Lead Plaintiffs and the ERISA Plaintiffs will receive
claims that will be satisfied through Delphi’s final plan of reorganization as confirmed by the
Bankruptcy Court. The Lead Plaintiffs will be granted a single allowed claim in the face amount of
$204 million, which will be satisfied by Delphi providing $204 million in consideration in the same
form, ratio, and treatment as that which will be used to pay holders of general unsecured claims
under its plan of reorganization. If an individual plaintiff opts out of the settlement reached
with the Lead Plaintiffs and ultimately receives an allowed claim in Delphi’s chapter 11 cases, the
amount received by the opt-out plaintiff will be deducted from the settlement reached with the Lead
Plaintiffs. Delphi will object to any claims filed by opt out plaintiffs in the Bankruptcy Court,
and will seek to have such claims expunged. The settlement with the ERISA Plaintiffs is structured
similarly to the settlement reached with the Lead Plaintiffs. The ERISA Plaintiffs’ claim will be
allowed in the amount of $24.5 million and will be satisfied with consideration in the same form,
ratio, and treatment as used to pay holders of general unsecured claims under such plan of
reorganization. Unlike the settlement reached with the Lead Plaintiffs, the ERISA Plaintiffs will
not be able to opt out of their settlement.
In addition to the amounts to be provided by Delphi from the above described claims in its chapter
11 cases, the Lead Plaintiffs will also receive a distribution of insurance proceeds up to $89
million, including a portion of the remainder of any insurance proceeds that are not used by
certain former officers and directors who are named defendants in various actions, and a
distribution of $1.5 million from certain underwriters named as defendants in the Securities
Actions. In addition, Delphi’s insurance carriers have also agreed to provide $20 million to fund
any legal expenses incurred by certain of the former officer and director named defendants in
defense of any future civil actions arising from the allegations raised in the securities cases.
The ERISA Plaintiffs will also receive a distribution of insurance proceeds in the amount of $22.5
million. Settlement amounts from insurers and underwriters will be paid in cash on or before
September 19, 2007. All amounts paid will be placed in escrow pending Bankruptcy Court approval.
Delphi has separately agreed with a third-party for reimbursement of $15 million as consideration
for the releases described below.
The MDL Settlements include a dismissal with prejudice of the ERISA and securities cases and a full
release as to certain named defendants, including Delphi, Delphi’s current directors and officers,
the former directors and officers who are named defendants, and certain of the third-party
defendants. The Company also received a demand from a shareholder that the Company consider
bringing a derivative action against certain current and former directors and officers premised on
allegations that certain current and former directors and officers made materially false and
misleading statements in violation of federal securities laws and/or of their fiduciary duties.
The Company appointed a committee of the Board of Directors (the “Special Committee”) to evaluate
the shareholder demand. As a component of the MDL Settlements, the Special Committee determined
not to assert these claims; however, it has retained the right to assert the claims as affirmative
defenses and set-offs against any action to collect on a proof of claim filed by those individuals
named in the demand for derivative action should the Company determine that it is in its best
interest to do so.
As a result of the MDL Settlements, Delphi expects to recognize a gain of approximately $126
million due to the recognition of insurance proceeds and other contributions as well as the
adjustment to the previously recognized liability for the final settlement amount. Delphi’s net
expense for this matter in 2007 is expected to be approximately $206 million, which is in addition
to $8 million previously recorded.
FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K, including the exhibits being filed as part of this report, as well
as other statements made by Delphi may contain forward-looking statements that reflect, when made,
the Company’s current views with respect to current events and financial performance. Such
forward-looking statements are and will be, as the case may be, subject to many risks,
uncertainties and factors relating to the Company’s operations and business environment which may
cause the actual results of the Company to be materially different from any future results, express
or implied, by such forward-looking statements. In some cases, you can identify these statements
by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of
these terms and other comparable terminology. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited to, the following:
the ability of the Company to continue as a going concern; the ability of the Company to operate
pursuant to the terms of the debtor-in-possession financing facility; the terms of any
reorganization plan ultimately confirmed; the Company’s ability to obtain Bankruptcy Court approval
with respect to motions in the chapter 11 cases prosecuted by it from time to time; the ability of
the Company to develop, prosecute, confirm and consummate one or more plans of reorganization with
respect to the chapter 11 cases; the Company’s ability to satisfy the terms and conditions of the
new Equity Purchase and Commitment Agreement; risks associated with third parties seeking and
obtaining Bankruptcy Court approval to terminate or shorten the exclusivity period for the Company
to propose and confirm one or more plans of reorganization, for the appointment of a chapter 11
trustee or to convert the cases to chapter 7 cases; the ability of the Company to obtain and
maintain normal terms with vendors and service providers; the Company’s ability to maintain
contracts that are critical to its operations; the potential adverse impact of the chapter 11 cases
on the Company’s liquidity or results of operations; the ability of the Company to fund and execute
its business plan (including the transformation plan described in Item 1. Business “Potential
Divestitures, Consolidations and Wind-Downs” of the Annual Report on Form 10-K for the year ended
December 31, 2006 filed with the U.S. Securities and Exchange Commission (the “SEC”)) and to do so
in a timely manner; the ability of the Company to attract, motivate and/or retain key executives
and associates; the ability of the Company to avoid or continue to operate during a strike, or
partial work stoppage or slow down by any of its unionized employees and the ability of the Company
to attract and retain customers. Additional factors that could affect future results are
identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006,
including the risk factors in Part I. Item 1A. Risk Factors, contained therein and the Company’s
quarterly periodic reports for the subsequent periods, including the risk factors in Part II. Item
1A. Risk Factors, contained therein, filed with the SEC. Delphi disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a result of new
information, future events and/or otherwise. Similarly, these and other factors, including the
terms of any reorganization plan ultimately confirmed, can affect the value of the Company’s
various prepetition liabilities, common stock and/or other equity securities. Additionally, no
assurance can be given as to what values, if any, will be ascribed in the bankruptcy cases to each
of these constituencies. A plan of reorganization could result in holders of Delphi’s common stock
receiving no distribution on account of their interest and cancellation of their interests. In
addition, under certain conditions specified in the U.S. Bankruptcy Code, a plan of reorganization
may be confirmed notwithstanding its rejection by an impaired class of creditors or equity holders
and notwithstanding the fact that equity holders do not receive or retain property on account of
their equity interests under the plan. In light of the foregoing, the Company considers the value
of the common stock to be highly speculative and cautions equity holders that the stock may
ultimately be determined to have no value. Accordingly, the Company urges that appropriate caution
be exercised with respect to existing and future investments in Delphi’s common stock or other
equity interests or any claims relating to prepetition liabilities.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
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Exhibits. The following exhibit is being furnished as part of this report. |
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| Exhibit |
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Description |
99(a)
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Stipulation and Agreement of Settlement With Certain Defendants — Securities
Actions, dated August 31, 2007 |
99(b)
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Stipulation and Agreement of Settlement With Certain Defendants — ERISA
Actions, dated August 31, 2007 |
99(c)
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Stipulation and Agreement of Insurance Settlement, dated August 31, 2007 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DELPHI CORPORATION |
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(Registrant) |
Date: September 5, 2007 |
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By: /s/ DAVID M. SHERBIN |
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David M. Sherbin, |
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Vice President, General Counsel |
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and Chief Compliance Officer |