Delphi said Friday it has sued its former lead equity investor, Appaloosa Management, for jeopardizing its emergence from bankruptcy by pulling out of a $2.55 billion investment deal.
Troy, Mich.-based Delphi Corp. said in a lawsuit filed in U.S. Bankruptcy Court that Appaloosa breached a long-standing deal to invest in the auto parts maker when it pulled out in April. Delphi seeks to force Appaloosa to stick to its commitment, or to compensate the company for the loss of the deal.
It did not say how much it seeks in damages.
Delphi calls its dealings with Appaloosa "a story of trust and betrayal." Its filing said that Appaloosa's failure to do the deal "derailed Delphi's progress toward emergence from Chapter 11 in April 2008, and has prevented consummation of the plan."
Appaloosa's withdrawal put the company's reorganization plan at risk, causing further delay in a case that has been postponed several times already because of the crisis in credit availability.
Appaloosa, run by David Tepper, had committed to investing as much as $1.08 billion under the plan, but its relationship with Delphi grew strained after the auto parts maker struggled to get $6.1 billion in loans that it needed to exit bankruptcy.
To get the loans it needed to meet the terms of the Appaloosa deal, Delphi had sought more financing from its former parent, General Motors Corp. Appaloosa had harshly opposed GM's greater participation, saying that it threatened the influence of the equity investors.
Tepper had said in a letter sent to Delphi last month that he should be entitled to $82.5 million in fees, because Delphi breached their agreement by seeking an alternative transaction. It referred in its filing to Delphi's effort to take more loans from GM.
Delphi, meanwhile, now believes it is owed the more than $60 million in fees it has spent on setting up the equity deal, and damages it suffered because of Appaloosa's withdrawal.
In its filing, Delphi attacked Appaloosa and Tepper for their "betrayal of trust," an accusation designed to hurt Appaloosa's credibility in the close-knit world of private equity players who value integrity in dealmaking.
A call made to Tepper's office late Friday was not immediately returned.
The other investors in the Appaloosa-led group are Harbinger Capital Partners Master Fund I Ltd., Merrill Lynch, Pierce, Fenner & Smith Inc., UBS Securities LLC, Pardus Capital Management LP and Goldman Sachs Group Inc.
Delphi has been operating under Chapter 11 bankruptcy protection since October 2005. In its case, it eliminated thousands of jobs for union workers in the U.S. and shifted manufacturing to cheaper overseas factories.
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