Delphi launches financing, questions linger

DETROIT (Reuters) - Bankrupt auto-parts maker Delphi Corp DPHIQ.PK said on Monday it was re-launching a revised $6.1 billion exit financing package including a larger role for former parent General Motors Corp GM.N.

The proposed exit financing package, which is being arranged by J.P. Morgan Securities Inc and Citigroup Global Markets Inc, comes after a U.S. bankruptcy judge cleared Delphi to move ahead with the borrowing program that relies on GM to provide up to $2.825 billion in loans.

The package includes a $1.6 billion asset-backed revolving credit facility and at least $1.7 billion through a first-lien term loan. GM will underwrite a first-lien term note of up to $2 billion to be issued to an affiliate of GM.

The U.S. automaker, which spun off Delphi in 1999, also agreed to take on any part of an $825 million second-lien term loan that cannot be placed with investors.

A group of investors led by Appaloosa Management that had agreed to a $2.55 billion equity infusion to support Delphi's emergence from bankruptcy has opposed the larger role for GM. That opposition has threatened to scuttle the reorganization plan.

In bankruptcy court filings, lawyers for Appaloosa argued that the revised deal would give GM too much influence over its former affiliate as it emerges from Chapter 11 protection.

Other equity investors in Delphi include Harbinger Capital, Merrill Lynch & Co MER.N, UBS AG (UBSN.VX), Pardus Capital and Goldman Sachs Group Inc. (GS.N)

All of the proposed equity investors, with the exception of Goldman Sachs, have objected to GM's stepped-up role in the exit financing.

Analysts have said the investors are likely worried about the value of their proposed stake in Delphi and seeking a way out of the deal, given the pressure on the auto sector and the risk that the U.S. economy has slipped into recession.

For its part, GM has warned that a failure to secure Delphi's exit from bankruptcy could cause it to realize even deeper losses on its exposure to the company and force it to risk a disruption of its production.

Kirk Ludtke, an analyst with CRT Capital Group, said it was likely Delphi would complete its $6.1 billion exit financing this week, setting the stage for a decision by the equity investors.

"Our view is that there is a significant probability that the plan investors may simply not fund," Ludtke said.

If that happens, Delphi could demand a termination fee of $250 million, he said.

GM has already written off $7.5 billion in exposure to Delphi. Troy, Michigan-based Delphi filed for bankruptcy protection in October 2005.

(Reporting by Kevin Krolicki; Editing by Steve Orlofsky)