Judge OKs Delphi's use of DIP loan past deadline

NEW YORK (Reuters) - A bankruptcy court on Monday granted Delphi Corp's DPHIQ.PK request to allow the U.S. auto parts maker to continue using the proceeds from its debtor-in-possession financing after the loan expires on December 31.

The company, operating under Chapter 11 bankruptcy protection, had sought court approval to allow the company to continue to access its $4.35 billion bankruptcy financing through the first half of 2009. Delphi said it needed the liquidity amid turbulence in the credit markets.

The approval means "all the people that do business with Delphi globally now have a transparent view into our liquidity into next year," Delphi attorney Jack Butler told reporters.

The court approved the motion over the objections of some lenders, including a group of Tranche C lenders who said the so-called accommodation agreement financially favored the "relationship banks" that had earlier negotiated the agreement and "tramples" the rights of other lender groups.

Attorney Susheel Kirpalani, who represented the Tranche C lenders, said the motion would "eviscerate" the previous agreement telling Judge Robert Drain that "debtors are looking for a back door way to prevent lenders from being repaid."

But the judge said the debtors "do, in fact, have the right to enter into the accommodation agreement and obtain the forbearance of the DIP lenders."

Delphi said in a U.S. Securities and Exchange Commissions filing on November 26 that it expected its cash and other available liquidity to drop by almost half, to $851 million by the end of March 2009, from $1.68 billion at the end of October,

The bankruptcy case is being heard at the U.S. Bankruptcy Court for the Southern District of New York.

Delphi is the former parts unit of General Motors Corp GM.N.

(Editing by Leslie Gevirtz)