Jul. 18--A deal between General Motors Co. and key lenders to Delphi Corp. to purchase most of the assets of the Troy-based supplier and bring it out of Chapter 11 bankruptcy protection could be imminent, a person familiar with the deal said Friday.

That agreement would be different than the deal announced June 1 between GM and Los Angeles-based private equity fund Platinum Equity. In that deal, Platinum was to buy Delphi's international operations and potentially four plants in the United States for $3.6 billion.

While GM and Delphi had seemed to back that deal wholeheartedly, Delphi's lenders, who have powerful standing in bankruptcy court, had protested the deal and have been preparing their own counterbid on the business.

Bankruptcy rules give the holders of bankruptcy loans the right to be paid first, even before lawyers. The rules are a pillar of bankruptcy laws that encourage lenders to invest in insolvent companies, in an effort to help them reorganize rather than liquidate.

Bankruptcy lenders are "by law, entitled to the highest protections," said Joel Applebaum, bankruptcy lawyer at Clark Hill PLC in Detroit.

In this case, Delphi's loan agreement gives the lenders liens on essentially all of Delphi's assets.

The lenders have the right to foreclose on the supplier to get their money back, which threatens GM's production by halting the supply of essential parts.

An auction for Delphi's assets slated for Friday has been delayed until Tuesday, giving GM, Delphi, its lenders and the U.S. Treasury more time to negotiate a deal in which lenders will use the money they're owed to make a bid for the business.

The group of lenders at the heart of the bid includes several hedge funds, led by New York-based Elliott & Associates, which hold $800 million of a $3.5-billion bankruptcy loan that Delphi used to keep its operations running during its bankruptcy. Those loans were extended through various agreements and eventually through a forbearance agreement as Delphi ran into difficulty obtaining money to emerge from bankruptcy last year.

But Platinum's deal to acquire Delphi in a $3.6-billion deal backed largely by Delphi's former parent GM would pay off portions of the multibillion loan in full but pay a large chunk of it only 20 cents on the dollar.

Delphi has defended its deal with Platinum, saying the portion of the loan that would receive 20 cents on the dollar was sold on the secondary market and the current holders paid about 20 cents on the dollar for the debt.

The lenders' "bid will represent a higher and better offer to Delphi," according to filings by the lender group this week.

If the deal is reached at Tuesday's auction, it will be Platinum's decision whether it should raise its bid for the business.

Contact JEWEL GOPWANI: 313-223-4550 or jgopwani@freepress.com

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