New York (HedgeCo.Net) – Hedge Fund Appaloosa Management may have tried to turn their back on Delphi, but somehow they just can’t seem to get away.  Ensnarled in a nasty court battle with the Michigan auto parts supplier, the judge is now reconsidering original fraud claims brought against the New Jersey based hedge fund. 

Delphi had sued the investor group headed by Appaloosa that originally agreed to inject $2.55 billion into the bankrupt company that was supposed to help lift them out of Chapter 11.  The investors commitment was going to provide a much needed piece of the $6.1 billion in financing that Delphi needed to secure by the April deadline.  When Appaloosa walked away as the deadline neared, Delphi was left scrambling, clinging only to former parent company General Motors. 

Judge Robert Drain told a Manhattan Court this week “It seems to me that I was unclear in what aspects of the allegations needed to be dealt with…I may have well been wrong.”

Drain said that when he dismissed this claim for fraud originally, he did not feel that Appaloosa made “affirmative misrepresentations” to Delphi about plans to scrap the financing deal.  Now, Drain is reconsidering, saying that any failures to communicate a change of mind could very well constitute fraud.

Both parties were asked to gather more information and submit briefs on the fraud claim by the next hearing on October 21.  Delphi is seeking damages from Appaloosa and a ruling that could make them deliver their original financial obligation.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Vindicator – A bankruptcy judge said Wednesday he may let Delphi pursue wider fraud claims against the Appaloosa Management hedge fund, which backed out of a deal to invest $2.55 billion in the auto supplier.

Appaloosa had led a group of investors to inject as much as $2.55 billion into Delphi in exchange for stock once it reorganized, but the investors withdrew from the deal in April. Delphi Corp. sued Appaloosa in May, accusing it of deliberately and secretly working to sabotage Delphi’s effort to satisfy a condition of their deal: that Delphi should raise $6.1 billion in exit financing to support its emergence from Chapter 11.

On Wednesday, lawyers for Appaloosa sought the right to improve its position in the lawsuit, but in doing so the hedge fund may have opened the door to wider charges.

Judge Robert Drain had ruled in July that Delphi could pursue a claim that Appaloosa had misrepresented its intentions. Delphi lawyers argued that Appaloosa manager David Tepper, a Goldman Sachs alum and well-known hedge fund manager, gave his verbal commitment to do the deal when he testified in December 2007. They described his testimony as a declaration that “a deal is a deal,” which to them meant that Appaloosa’s withdrawal constituted fraud.

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New York (HedgeCo.Net) – American auto parts maker Delphi has been given the green light to proceed with their suit against hedge fund Appaloosa Management.

U.S. Bankruptcy Judge Robert Drain denied a request by Appaloosa yesterday to dismiss the fraud and breach of contract lawsuit that Delphi had waged against them. Delphi is attempting to collect the $2.55 billion that was originally promised to them by Appaloosa as part of their plan to exit Chapter 11.

While Judge Drain did disregard some of Delphi’s complaints, sources say he rejected the arguments of Appaloosa, including the one that stated the agreement with Delphi only allows for damages of up to $250 million.

The money was part of a bigger, $6.1 billion refinancing strategy that was promised to Delphi through various investors. After $2 billion was granted by former parent company General Motors, Appaloosa got weary of the deal and cited an overdependence on GM. One day before the deadline to walk away, Appaloosa did just that, even though Delphi had attained the rest of the financing needed to solidify the deal.

The lawsuit is scheduled to go to trial next year.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!
Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com

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