Judge extends Delphi repayment deadline

NEW YORK (AP) — A bankruptcy judge said Monday that auto supplier Delphi can continue to access the proceeds of $4.35 billion in loans after the Dec. 31 expiration date.

The ruling effectively allows Delphi to default on the loans when they mature Dec. 31, and lets the supplier move back its repayment deadline to June 30. The company has used the loans, known as debtor-in-possession financing, to fund operations while under bankruptcy protection.

Delphi said it needed to continue to access the DIP financing because of the severe tightness in the credit markets.

The supplier has been relying on financing from former parent General Motors Corp., which has agreed to lend Delphi an additional $600 million, contingent on Delphi’s gaining the extension and access to an additional $3.2 billion to $3.4 billion in DIP financing.

GM faces its own cash crunch and could be forced to file for bankruptcy unless Congress agrees to provide it with billions of dollars in loans.

Troy, Mich.-based Delphi has received an extension twice before, but certain lenders objected this time to changing the terms of the loan agreement.

Some lenders had objected that Delphi did not have the authority to change the loan agreement without unanimous approval from lenders, and that even if Delphi had the authority to change the loan terms, that it couldn’t change them the way the company had proposed.

But U.S. Bankruptcy Judge Robert Drain overruled those objections, and said Delphi did have the authority to modify the agreement.