Any rescue plan for Delphi needs GM, investor and court backing

The move comes after a group of private equity firms offered to spend $3.4bn to help Delphi emerge from bankruptcy.

Experts said the investment bank's plan was likely to signal a battle for control for Delphi. Any deal will need bankruptcy court and unions backing.

Delphi filed for bankruptcy in 2005, a move that hurt its former parent and top client US carmaker General Motors.

On Monday, a group led by Appaloosa Management and Cerberus Capital Management offered to give Delphi $3.4bn to get it back in its feet, in return for a large chunk of the company.

'Fair deal'

Highland said its proposal would be "fair to all" existing Delphi shareholders as they would be allowed to take part in a �4.7bn stock offering of the reorganised firm to finance the plan.

Under the Appaloosa-Cerberus deal, only the private equity firms involved would share in a $1.2bn stock offering, which Highland claimed would give the group control of Delphi.

"In addition Appaloosa and Cerberus would have effective control of the board through their right to name six of the 12 directors at Delphi," Highland said in a statement.

The investment bank also hinted that it may ask the court for more time to consider the rival offers.

Delphi had been expected to ask the New York federal bankruptcy court to approve the Appaloosa-Cerberus plan on 5 January.

Either proposal needs three-way backing from the courts, Delphi investors and GM.

Delphi and Appaloosa declined to comment on the latest offer, while Cerberus was unavailable for comment.