From Detroit Free Press

TROY, MI -- A key financial agreement that Delphi Corp. needs to exit bankruptcy is in jeopardy.

Appaloosa Management LP, the lead investor in a deal that would have pumped up to $2.55 billion into the Troy, MI-based supplier, said in a filing Thursday that it has terminated its agreement because certain conditions were not met.

Delphi spokesman Lindsey Williams declined to comment on the unmet terms.

We are aware of the filing and we continue to be in discussions with the plan investors as well as GM," and committees representing creditors and shareholders, he said.

This is the latest setback in Delphi's two-year bankruptcy reorganization, led by restructuring veteran Steve Miller.

The company has had difficulty obtaining a loan in a tight credit market, forcing it to change its reorganization plan.

The filing comes after Delphi changed its reorganization plan to reduce the cash paid out to General Motors Corp. and lower the estimated share price of Delphi stock. Delphi made the changes to win a $6.8-billion loan to help it exit Chapter 11 bankruptcy.

The company filed court papers Tuesday saying it has recruited Citigroup and JPMorgan to line up that loan.

But unsecured creditors and shareholders have objected to the changes Delphi has made, forcing the company to postpone a bankruptcy hearing on its reorganization plan until the end of the month.

In Delphi's plan with Appaloosa, the private equity firm led a group of investment banks and other private equity groups to buy up to $2.55 billion in preferred and common Delphi stock.

In recent weeks that plan has been changed, resulting in investor Goldman Sachs saying it was no longer part of the deal.

A securities filing last week lays out a number of conditions that Delphi needed to meet for the deal, including Goldman Sachs signing back on to the deal.

Meanwhile, unsecured creditors have objected to Delphi's investment plan, saying there's a chance the investors could be given shares of the company at no charge, threatening to dilute the value of shares paid to creditors.

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