Delphi Corp. has caught the eye of two investment groups that, flush with year-end cash, may be seeing a way to make a buck from the nation's largest auto parts supplier as it emerges from bankruptcy protection.
Highland Capital Management on Thursday proposed as much as $4.7 billion in refinancing in a letter to Delphi's board. The hedge fund said it opposed a plan that Delphi accepted Monday from an investor group led by Appaloosa Management and Cerberus Capital Management to spend as much as $3.4 billion to help the company emerge from Chapter 11.
Highland Capital's plan envisions a $4.7-billion rights offering of unsubscribed shares open to all existing stockholders with more than 0.5% of the common shares.
Mike Wall, an auto analyst with CSM Worldwide in Grand Rapids, Mich., said the multiple suitors spoke well for Delphi's future and reflected growing interest in the automotive business from the financial sector.
"These aren't simply big billionaires chasing a quick and easy buck here," he said. "I think these are some very interesting and potentially strategic buys."
Dallas-based Highland Capital manages about $35 billion in assets. It is Delphi's second-largest shareholder, at nearly 8.9%; Appaloosa holds 9.3%.
"Highland Capital believes that, unlike the AppaloosaCerberus deal, its proposal is fair to all groups that currently make up Delphi's capital structure, allows participation by all equity holders through a rights offering and will promote good and independent corporate governance for the company," Highland Capital said in a statement.
Delphi spokesman Lindsey Williams said the company had no immediate comment on Thursday's proposal.
Chatham, N.J.-based Appaloosa and New York-based Cerberus did not respond to requests for comment.
The deal announced Monday would see the investor group -- rounded out by Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities -- invest $1.4 billion to $3.4 billion in Delphi. In exchange, it would get common and preferred stock to be issued in the first half of 2007.
Any agreement must be approved by a federal bankruptcy judge in New York, where a hearing was scheduled for Jan. 5.
Troy, Mich.-based Delphi filed for Chapter 11 bankruptcy protection in October 2005, and it said Monday's agreement was part of a plan to emerge from bankruptcy by the second quarter of next year.