DELPHI BOOKS HIDDEN FROM BIDDERS

A group of hedge funds that provided auto-supply company Delphi with financing as it moves through bankruptcy aren’t getting access to the firm’s books, hindering their ability to make a takeover offer, according to a person familiar with the situation.

The hedge funds — which are being led by Elliott Associates and face a July 10 deadline to decide whether or not to bid for the company and argue their efforts — are being thwarted by Delphi, which has yet to let them look at the company’s finances.

The funds provided Delphi with $2.9 billion in debtor-in-possession financing and have expressed an interest in buying the company, which is the largest supplier of auto parts to government-owned General Motors.

Delphi was to be sold to Los Angeles-based, private-equity firm Platinum Equity Partners, but the hedge funds cried foul at a plan to pay them just a fraction of the $2.9 billion they had provided to the money-losing company as part of the sale.

Earlier this month, a judge agreed and ordered Delphi to re-open the auction process.

However, a source close to the DIP lenders said it’s been anything but easy getting Delphi to play ball, and if they don’t get access to the company’s books soon, they might ask the judge handling the bankruptcy to intervene, the source said.

As part of any offer the lenders would make, it’s likely they’d roll over the existing debt, in what is known as a credit bid, and raise additional money to finance the deal and keep the company going until it’s profitable.

Officials at Delphi and Elliott declined to comment. A source said one issue that might be at play is how much discretion Delphi, working through investment bank Rothschild, has in deciding who’s a qualified bidder. When setting the auction-participation requirements, US Bankruptcy Court Judge Robert Drain wasn’t clear about how he viewed a credit bid, though he did require all bidders to explain how they’d finance an offer.

A source directly involved in the process said Drain might have been deliberate in not providing clarity on a credit bid in order to encourage a negotiated settlement.