Delphi's Lenders Prevail in Bankruptcy Auction : Federal Goverment Defeated in Court

The Wall Street Journal reports:

Delphi Corp.'s lenders prevailed in a bankruptcy auction and are poised to take control of the bankrupt auto-parts supplier, beating back a government-orchestrated deal to sell the company to General Motors Co. and a California-based private-equity firm.

Delphi's lenders prevailed in the auction by forgiving more than $3.4 billion in debt they are owed, a process known as credit bidding. The debt, a so-called debtor-in-possession loan, is owned by several investment funds including Elliott Management and Silver Point Capital LP.

This is a big story.