From Detroit Free Press

TROY, MI -- As it wrestles with a tight credit market, Delphi Corp. has turned to a few of its creditors and shareholders to help the company secure a loan that is critical to its exit from Chapter 11 protection.

The Troy, MI-based auto supplier has asked a judge to allow members of committees that represent shareholders and unsecured creditors in Delphi's bankruptcy case to take part in a multibillion-dollar loan the company is trying to assemble.

Those committees include at least two investment firms, a commercial bank and a union.

Although it's not unheard of, the move is unusual, said Rick Kruger, an insolvency attorney at Southfield, MI-based Jaffe Raitt Heuer & Weiss.

It is also another example of the tight credit market forcing Delphi to make unconventional moves in its more than two-year bankruptcy case.

Delphi last year lowered the loan that it seeks by $2 billion to $6.8 billion, which led the company to eliminate cash payouts to unsecured creditors.

In a regulatory filing on Monday, the company said it would further reduce that loan because it generated more cash between July and December than expected as of September when the company filed its initial plan.

Delphi didn't disclose how much that reduction would be.

Delphi is expected to begin formally seeking investors for exit loans this week, sources said.

A hearing on Delphi's request to borrow from creditors and shareholders is slated for Thursday. That hearing comes just a week before a critical court date for the auto supplier.

Delphi is due in court on Jan. 17 to seek approval of its reorganization plan.

Bankruptcy experts say that typically companies must have commitments for financing in place to win that approval.

"Given Delphi's critical need to obtain exit financing, there should be no impediment to the participation of statutory committee members in the syndication of exit financing," the company said in a court filing made last week.

Winning a loan from stakeholders might be easier than seeking all of the money through commercial banks, said Barbara Rom, bankruptcy attorney with Pepper Hamilton in Detroit.

(c) 2008, Detroit Free Press.