Delphi unsecured creditors committee joins fight to have plan confirmation order revoked

By Caroline Salls

Pittsburgh, July 23 - Delphi Corp.'s official committee of unsecured creditors was the second interested party to file a lawsuit Tuesday asking the U.S. Bankruptcy Court for the Southern District of New York to revoke its order confirming the company's plan of reorganization amid allegations of fraud.

As previously reported, indenture trustee Wilmington Trust Co. also filed a complaint asking the court to revoke the confirmation order.

According to the committee's complaint, "the confirmation order was procured by acts of promissory fraud by vulture investors Appaloosa Management LP, its founder David A. Tepper, and its shell entity created for this transaction, A-D Acquisition Holdings, LLC."

The committee said it is negotiating changes to the plan with the company based on the fraud allegations, but if the negotiations do not yield a resolution satisfactory to the committee, it will prosecute the lawsuit.

"Appaloosa has defrauded Delphi, the committee, all other parties in interest in these Chapter 11 cases, and the court by making numerous promises to remain committed to the plan and to use its best efforts to consummate the plan, while, at the same time, covertly discussing and then executing a strategy to ensure the plan's demise," the committee said in the complaint.

The committee said Appaloosa's "motive was greed," and Appaloosa has extracted more than $60 million in fees and millions more in expense reimbursements from Delphi's estates and its stakeholders, plus a pending $82.5 million alternative transaction claim.

"Although it lays claim to nearly $150 million in fees, Appaloosa is not going to make the [equity] investment, and it never intended to do so," the committee said in the complaint.

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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