Auto parts maker Delphi Corp said yesterday that the size of its bankruptcy exit financing package would be reduced and several changes would be made to its reorganization plan due to the roiling credit markets, Reuters reported yesterday. Delphi, which filed for court protection in October 2005 and expects to depart bankruptcy in the first quarter of next year, said that its exit financing package would be reduced by about $1.9 billion. The company also expects modification of a $2.55 billion equity plan led by Appaloosa Management LP, although the investors led by Appaloosa would still acquire $800 million of preferred stock and $175 million of common stock. A $1.575 billion discount rights offering would be open to unsecured creditors and eliminate the participation of current stockholders. Delphi said that the rights offerings would be conducted after the reorganization plan is confirmed by creditors.

Bankruptcy Judge Elizabeth Perris approved Cessna Aircraft Co.’s $14 million offer as the lead bid for the assets of Columbia Aircraft Manufacturing Corp., the Associated Press reported yesterday. Columbia Aircraft has a deal to sell its assets to Cessna, a unit of Textron Inc., for $14 million in cash. Cessna will also assume up to $2 million in claims held by supplier Garmin International Inc., as well as $5.8 million in other potential claims, according to court documents. If other interested buyers come forward, an auction will be held Nov. 27. Judge Perris approved a $500,000 break-up fee to be paid to Cessna if it is not selected as the buyer. Rival bids must be made by Nov. 20, but if no one makes a qualified bid, Columbia Aircraft can cancel the auction and ask the court to approve the sale to Cessna.

The Diocese of Davenport, Iowa, received an extension until Nov. 16 to file its reorganization plan in federal bankruptcy court, the Quad City Times reported on Saturday. The first extension gave the diocese more time to analyze 156 claims of sexual abuse, many of which date to the 1950s and ’60s, and determine what insurance coverage may exist. Some of those issues still are being resolved, according to the new motion. The diocese and the creditors’ committee filed a request for the extension in September and have asked for and received permission to request additional information from three insurance organizations.

Bankrupt lender American Home Mortgage Investment Corp. has sued Lehman Bros., accusing the investment bank of hitting American Home with improper margin calls in July and demanding money the company says it did not owe, the Associated Press reported yesterday. When the Melville, N.Y.-based lender couldn’t meet Lehman’s second margin call, for $7 million, Lehman foreclosed on $84 million worth of subordinated notes issued in American Home’s structured-finance operation. American Home is asking the court to order Lehman to return the notes or pay damages for the allegedly improper foreclosure. The company’s suit against Lehman is the second this week targeting former bankers for its Broadhollow and Melville structured-finance vehicles. Earlier, the company sued Bank of America, accusing it of defaulting on a duty to cover a $25 million shortfall in the sale price of mortgages owned by the two units.

The U.S. Labor Department said that auto parts supplier Delphi Corp. should pay more than $3 million to compensate 11,000 workers who lost millions because their retirement funds were incorrectly invested in a General Motors Corp. stock fund, the Toledo(Ohio) Blade reported today. The department’s $3.1 million claim against Delphi should stand because the company didn’t do enough to correct mistaken retirement investments, said Jonathan L. Snare, Labor’s acting solicitor. The company is asking the bankruptcy court to throw out the Labor Department’s claim, saying it took “immediate steps” to correct the mistake. The U.S. Bankruptcy Court in Manhattan will consider the company’s request Nov. 8.

Wilbur L. Ross Jr., who became a billionaire by investing in failed steel and textile companies, won approval to buy the loan-servicing unit of bankrupt American Home Mortgage Investment Corp. for as much as $500 million, Bloomberg News reported yesterday. Bankruptcy Judge Christopher Sontchi approved Ross’ purchase of the unit yesterday after the Melville, N.Y.-based lender last week resolved objections from dozens of companies, including units of Bear Stearns Cos., GMAC Mortgage and Citigroup Inc. Judge Sontchi rejected the remaining objections, which included questions about whether Ross was financially committed to the sale. Ross is buying the right to service about $45.3 billion worth of loans that American Home originated. Read more.

In related news, three affiliates of bankrupt American Home Mortgage Holdings Inc. have accused Bank of America NA of reneging on swap agreements in which they are entitled to more than $25 million, Bankruptcy Law360 reported yesterday. Broadhollow Funding LLC, Melville Funding LLC and a unit of American Home filed an adversary suit on Monday in a Delaware bankruptcy court which seeks to hold BofA accountable for a shortfall in their sale of American Home loans.

American Home Mortgage Investment Corp. said Friday that it has struck deals with several investment banks that had earlier objected to the sale of its loan-servicing arm to billionaire Wilbur Ross’ private equity firm, Bankruptcy Law360 reported on Friday. The bankrupt mortgage lender’s attorneys said in Delaware bankruptcy court on Friday that JP Morgan Chase & Co., Citibank, Bank of New York Mellon Corp., Bear Stearns Cos. Inc., Countrywide Financial Corp. and Goldman Sachs Group Inc. are withdrawing the objections they filed earlier this month. In late September, Ross’ firm, W.L. Ross & Co., was named lead bidder for the court-approved auction of the servicing unit with a $435 million purchase offer.

Medford Crossings North LLC and nine other companies controlled by New Jersey real estate developers Mitchell R. Cohen and Carl Freedman filed for chapter 11 protection Wednesday, the Associated Press reported yesterday. In separate petitions filed in the U.S. Bankruptcy Court in Camden, N.J., Medford Crossings and its affiliates each listed assets in the range of $100,000 to $1 million and debts in the range of $1 million to $100 million. In addition to Medford Crossings North, the following entities filed for chapter 11 protection: Medford Crossings South LLC, Purple Tree One LLC, Purple Tree Two LLC, Purple Tree Three LLC, Purple Tree Four LLC, Purple Tree Five LLC, Purple Tree Ten LLC, Purple Tree Investments LLC, and FC Medford Residential LLC. The Cherry Hill, N.J.-based companies each estimated that they have fewer than 50 creditors, and said they expect to have enough funds to make payments to unsecured creditors.

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Wells Fargo and other U.S. regional banks reported disappointing third-quarter results yesterday, hurt by loan losses that may rise further as the U.S. housing slump deepens, Reuters reported yesterday. Banks are struggling as tight capital markets force them to write down some holdings as investors take less risk. Meanwhile, falling housing prices are making it harder for homeowners to refinance, adding to delinquencies, and leaving some commercial real estate borrowers strapped for cash. San Francisco-based Wells Fargo wrote down $490 million for mortgages, and said that home equity losses rose more than fivefold to $153 million. Wells Fargo expects the latter to rise in the fourth quarter and stay “elevated” in 2008. Minneapolis-based U.S. Bancorp set aside $199 million for credit losses, up 47 percent. Nonperforming assets rose to $641 million from $565 million on June 30, hurt by two mortgage customers that declared bankruptcy.

Bankrupt mortgage lender American Home Mortgage Holdings Inc. and its creditors are trying to keep the sale of its servicing platform on schedule, despite moves by GMAC Mortgage LLC and Residential Funding Co. LLC to stall the sale hearing until a later date, Bankruptcy Law360 reported yesterday. The sale of American Home’s servicing platform has been pushed back a number of times due to a slew of objections from parties like GMAC. Earlier this month, GMAC and a number of other parties objected to the sale and filed notices requesting depositions of American Home officials and their investment banking advisors. Although the mortgage company has opposed the scope of the deposition requests, they have made a handful of witnesses available for depositions, American Home said.