Delphi indenture trustee asks court to revoke plan confirmation amid fraud allegations

By Caroline Salls

Pittsburgh, July 22 - Delphi Corp. indenture trustee Wilmington Trust Co. filed a lawsuit Tuesday that asks the U.S. Bankruptcy Court for the Southern District of New York to revoke the order confirming Delphi's plan of reorganization "on the grounds that the entry of the confirmation order was procured by fraud."

According to the lawsuit, On May 16, Delphi filed an adversary proceeding against Appaloosa Management, LP, A-D Acquisition Holdings and other equity purchase commitment agreement parties under which "the debtors acknowledge and concede that the confirmation order was procured by fraud."

Specifically, Wilmington Trust said Delphi alleged that equity investor ADAH defrauded the court, the Delphi debtors and the their various stakeholders, including Wilmington Trust, by stating that it had every intention of performing its obligations under the equity purchase agreement "when, in fact, it had no such intention."

"By the debtors' own admission, ADAH's misrepresentations were fraudulent and resulted in the court's approval and entry of the confirmation order," Wilmington said in the lawsuit.

In addition, Wilmington alleged that Delphi's plan "is inextricably entwined" with the equity purchase agreement, and the equity investment was needed for the plan to take effect.

As a result of the failure of the plan investors to complete the equity investment, Wilmington said the plan cannot take effect.

"The debtors thus should not be allowed to hamstring their creditors and bind them to a plan that can never become effective," Wilmington said in the lawsuit.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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