August 8, 2008 / 10:08 AM / 9 years ago

GM agrees to lend Delphi $300 mln more

2 Min Read

<p>A general view of the Delphi Flint East assembly plant in Flint, Michigan June 22, 2007.Rebecca Cook</p>

(Reuters) - General Motors Corp (GM.N) agreed to lend Delphi Corp DPHIQ.PK a further $300 million as the automaker's former parts unit struggles to exit bankruptcy protection, courts papers show.

Delphi, in court papers filed Wednesday, said GM would increase its loan to the auto parts supplier to $950 million from $650 million so Delphi can maintain a minimum level of liquidity.

A hearing with the U.S. Bankruptcy Court in New York is scheduled for August 26.

Last month, U.S. bankruptcy court judge Robert Drain ruled that Delphi can proceed with a suit against hedge fund Appaloosa Management LP for withdrawing from a plan to invest in the auto parts maker.

Delphi, which filed for bankruptcy protection in October 2005, had entered the final stages of exiting bankruptcy in April when Appaloosa and other investors pulled out of a plan that would have provided up to $2.55 billion to support Delphi's reorganization.

The failure to consummate the reorganization in April left Delphi scrambling for alternatives, delaying its emergence from bankruptcy protection.

The decision by the investor group, which came amid a sharp downturn in U.S. auto sales and more risk-averse financial markets, was seen as raising the cost of the reorganization process for GM, Delphi's former parent and largest customer.

Last week, GM reported a $15.5 billion quarterly loss, the third-largest in its 100-year history. GM took $9.1 billion in charges, including $4.4 billion for restructuring and buyouts of U.S. factory workers and $2.8 billion for its exposure to Delphi.

Reporting by Tenzin Pema in Bangalore; Editing by David Holmes

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