Delphi asks court to force investors to pay $2.6 bln
DETROIT (Reuters) - Auto parts supplier Delphi Corp DPHIQ.PK on Friday filed a lawsuit against an investor group led by Appaloosa Management L.P in an attempt to win a court order requiring the group to provide $2.55 billion in equity or damages to the bankrupt company.
Last month, an investor group led by Appaloosa backed out of a $2.55-billion equity commitment to Delphi that had been intended to support the company's emergence from bankruptcy.
The decision by the investor group, which came amid a sharp downturn in U.S. auto sales and more risk-averse financial markets, was seen as delaying Delphi's emergence from Chapter 11 after two and a half years and raising the cost of the process for General Motors Corp GM.N, Delphi's former parent and largest customer.
"This is a story of trust and betrayal," Delphi said in its filing with U.S. Bankruptcy Court in New York.
The Troy, Michigan-based supplier asked for the court to order the investor group, including an affiliate of Merrill Lynch MER.N, Goldman Sachs & Co and UBS Securities LLC, to provide up to $2.55 billion in funding or to clear the way for it to seek damages at trial for breach of contract and fraud.
Appaloosa had no immediate comment on the suit, which came over a month after Delphi had said it had hired outside counsel to consider its options against Appaloosa because of the failed investment deal.
The fund, which is headed by billionaire David Tepper, had charged that Delphi with breaching its commitments when it served notice that it was pulling out of the equity investment in early April, just hours before Delphi was due to wrap up its exit financing arrangements.
In its bankruptcy court filing, Delphi said it believed that the real reason Appaloosa pulled out of the deal was that a tough market had forced it to reconsider terms to which it had already agreed.
"Delphi believes that defendants backed out of the transaction simply because they decided they did not like the economics of the deal they had agreed to and that they never intended to close if the deal was under water," the company said in its filing.
GM, which has been working to cap its financial exposure to its former parts subsidiary and cut its parts procurement costs, said last week it had agreed to advance Delphi $650 million to help its emergence from bankruptcy.
In a statement, Delphi Vice President David Sherbin said the investor group led by Appaloosa had received over $60 million in fees for its financing commitment.
Other defendants named in the Delphi lawsuit were A-D Acquisition Holdings LLC, Harbinger Del-Auto Investment Co Ltd, Pardus DPH Holding LLC, Harbinger Capital Partners Master Fund I Ltd and the Pardus Special Opportunities Master Fund LP.
Appaloosa affiliate ADAH had committed to provide $1.08 billion of the $2.55 billion equity investment in Delphi under a deal struck in August 2007 and then amended in December.
Given the tougher credit markets and the slide in U.S. auto sales this year, analysts have said Delphi will be forced to go back to negotiate new financing agreements.
One concern for the Appaloosa-led investors was that Delphi could emerge from bankruptcy without enough liquidity to weather the tougher auto market, driving it back into a more costly second bankruptcy widely known as a "Chapter 22," a person familiar with the syndicate's decision making has said.
GM, which is attempting to recover from a $39 billion loss in 2007, has said it has been paying a $2 billion per year penalty on parts purchases from Delphi, which it spun off in 1999.
The automaker has booked $8.3 billion in charges related to its exposure to Delphi to date.
(Reporting by Kevin Krolicki, editing by Phil Berlowitz and Andre Grenon)
