TROY, Mich. — Delphi Corp. has filed complaints against Appaloosa Management L.P. and eight other plan investors and related parties who the company said on Apr. 4 refused to honor their equity financing commitment of up to $2.55 billion and refused to participate in the closing that would have led to Delphi’s successful emergence from Chapter 11 last month. The complaints were filed in the U.S. Bankruptcy Court for the Southern District of New York.
"We believe that the plan investors breached their obligations under the Equity Purchase and Commitment Agreement (‘EPCA’) that was the financial foundation for our court-approved plan of reorganization," said David Sherbin, Delphi vice president, general counsel and chief compliance officer. "The plan investors vigorously pursued a prominent role in our restructuring, received more than $60 million in fees for their commitments and positioned themselves to reap substantial profits after consummation of the plan," Sherbin said.
Delphi’s court filing alleges that the plan investors schemed to avoid their obligations rather than fulfill them. Following the failed Apr. 4 closing, Delphi retained special litigation counsel to evaluate the company’s legal rights and report its recommendations to a committee of the board of directors. The litigation that commenced on Friday is the result of that process.
"Delphi has been unwavering in its commitment to meet the needs of our customers and employees and to achieve a successful reorganization," Sherbin said. "Our efforts to emerge were seriously undermined when we failed to close because of the actions of Appaloosa and the other plan investors. We hold them accountable for the harm they have caused to Delphi and our stakeholders."
Defendants named in the complaints are:
— Appaloosa Management L.P.;
— 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 L.P.; and
— UBS Securities LLC.
Delphi asserts claims for breach of contract and fraud, and is asking the bankruptcy court to enter a judgment of specific performance requiring the plan investors to provide equity funding in an amount up to $2.55 billion pursuant to the EPCA and to pay compensatory and punitive damages in an amount to be determined at trial.
