Delphi sues Appaloosa, other plan investors for $2.55 billion equity contribution, damages

By Caroline Salls

Pittsburgh, May 16 - Delphi Corp. filed complaints against Appaloosa Management LP and eight other plan of reorganization investors in connection with their refusal to honor their $2.55 billion equity financing commitment and participate in the closing that would have led to Delphi's emergence from Chapter 11 bankruptcy in April, according to a company news release.

Delphi said the lawsuits assert claims for breach of contract and fraud and ask the U.S. Bankruptcy Court for the Southern District of New York to order the plan investors to provide the $2.55 billion in equity funding and to pay compensatory and punitive damages in an amount to be determined at trial.

"We believe that the plan investors breached their obligations under the equity purchase and commitment agreement that was the financial foundation for our court-approved plan of reorganization," Delphi vice president, general counsel and chief compliance officer David Sherbin said in the release.

"The plan investors vigorously pursued a prominent role in our restructuring, received over $60 million in fees for their commitments and positioned themselves to reap substantial profits after consummation of the plan."

Delphi said its complaint alleges that the plan investors schemed to avoid their equity commitment obligations rather than fulfill them.

As previously reported, following the failed closing, Delphi retained special counsel to evaluate its legal rights and report its recommendations to a committee of the board of directors. The company said that evaluation led to the filing of the lawsuit.

"Our efforts to emerge were seriously undermined when we failed to close because of the actions of Appaloosa and the other plan investors," Sherbin said in the release.

"We hold them accountable for the harm they have caused to Delphi and our stakeholders."

The defendants named in the complaint include Appaloosa Management LP, A-D Acquisition Holdings, LLC, Harbinger Del-Auto Investment Co. Ltd., Pardus DPH Holding LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., Goldman Sachs & Co., Harbinger Capital Partners Master Fund I, Ltd., Pardus Special Opportunities Master Fund LP and UBS Securities LLC.

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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