An interesting battle between two hedge funds to make money as Delphi Corporation emerges from bankruptcy appears to be brewing, according to reports in the US.

Delphi on Monday accepted a proposal from an investor group led by Appaloosa Management and Cerberus Capital Management to spend up to $US3.4bn to help the company out of bankruptcy protection.

However, on Thursday, Highland Capital Management proposed up to $4.7bn in refinancing in a letter to Delphi’s board of directors, saying it opposed the earlier plan.

The Associated Press (AP) said Highland Capital’s plan envisions a $4.7bn rights offering of unsubscribed shares open to all existing stockholders with more than 0.5% of the common shares.

John Fitzgibbon, publisher of the Jersey City, New J-based told AP the flurry of interest mirrors a trend by Wall Street venture capitalists toward mergers and acquisitions with an eye on taking companies public or selling them to someone else.

“The pendulum play is taking up name brand companies by VCs to restructure, looking to flip it into the IPO market,” he reportedly said. “After all, these people are venture capitalists, they’re not long term investors. This is what their strategy is.”

According to the Associated Press he added: “The shareholders of Delphi, I don’t know where they figure in the reorganisation but I’m sure they’re not at the front,” he said. “Debt gets paid first and it dribbles down. And finally, if there’s anything left over, then the stockholders get it.”

AP noted that Dallas-based Highland Capital, with offices in New York and London, currently manages about $35 billion in assets and is Delphi’s second-largest shareholder at nearly 8.9%, while Appaloosa holds 9.3% of the company’s stock.

“Highland Capital believes that, unlike the Appaloosa/Cerberus deal, its proposal is fair to all groups that currently make up Delphi’s capital structure, allows participation by all equity holders through a rights offering and will promote good and independent corporate governance for the company,” Highland Capital said in a statement cited by the news agency.

Highland Capital reportedly said its plan does not differ from the earlier version in that General Motors would get 7m – or 5% – of the 135.5m new Delphi shares issued to shareholders.

CSM Worldwide auto analyst Mike Wall told the Associated Press the multiple suitors speak well for the supplier’s future fortunes and reflect an upsurge in interest in the automotive business from the financial sector.

“There’s a lot of increasingly automotive experience coming into play here,” he told the news agency. “These aren’t simply big billionaires chasing a quick and easy buck here. I think these are some very interesting and potentially strategic buys.”

The Detroit Free Press pointed to several other successful restructurings currently taking place in auto components and noted the money men were interested in making their play after the hard work of plant closures, unprofitable unit sales and union negotitations had been done by the suppliers themselves, making them more attractive to outside investors.