A U.S. bankruptcy judge is likely to rule on Thursday whether auto parts supplier Delphi Corp can go ahead with its plan to sell its assets to a group of lenders and bring an end to its near four-year bankruptcy case.

Earlier this week Delphi's board accepted a bid from its debtor-in-possession lenders, including several hedge funds, to take over much of its operations. In exchange, the lenders, which include Elliott Management Corp, Monarch Alternative Capital and Silver Point Capital LP, agreed to forgive nearly $3.5 billion of debtor-in-posesssion (DIP) loans.

General Motors [GM.UL], Delphi's former parent, would take over some of the company's U.S. plants.

At a hearing in U.S. bankruptcy court in Manhattan on Wednesday, Judge Robert Drain overruled most of the objections to the transaction from union groups with concerns about the workers' pension and various state tax and workers compensation agencies, noting the potential added costs to Delphi and its investors.

Neither GM nor the DIP lenders have an open wallet, he said.

Judge Drain closed the evidentiary portion of Delphi's sale hearing on Wednesday evening, and said closing arguments in the case, could begin on Thursday shortly after 10 a.m.

In a slight tip of his hand, Judge Drain said he didn't see a need for long closing arguments on Thursday and that he felt, Delphi, GM and its lenders have been pursuing a path that's consistent with good business judgment.

Jack Butler, lead bankruptcy attorney for Delphi, told reporters after the hearing that pending the Judge's approval, Delphi hopes to close the sale by the end of the third quarter and is targeting August 31 as a closing date.

The closing of the transaction would thwart an earlier effort by Platinum Equity Capital Partners, a Beverly Hills, California private equity firm, to take over Delphi, in a deal with GM that had won the backing of the federal government's auto task force. Platinum is seeking a $30.5 million expense reimbursement for its efforts to complete the deal.

The case is In re Delphi Corp, U.S. Bankruptcy Court, Southern District of New York (Manhattan), No. 05-44481. (Reporting by Emily Chasan and Jonathan Stempel; Editing Bernard Orr)

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