Appaloosa May Face Old Delphi Claims Again

Oct 10 2008 | 1:50am ET

Hedge fund Appaloosa Management thought it dodged a bullet this summer when a federal judge dismissed part of an auto-parts maker’s lawsuit against it. It may have been wrong.

U.S. Bankruptcy Court Judge Robert Drain said Wednesday that he may have erred in dismissing the claim by Delphi Corp. that Appaloosa engaged in a secret campaign to avoid making good on a $2.55 billion equity investment deal it led. He asked the two sides to weigh in on whether the claims should be reinstated by Oct. 21.

“I’m afraid I was wrong on this point,” Drain said.

Delphi was relying on the Appaloosa-backed financing to exit bankruptcy protection. But Appaloosa and its partners pulled out of the deal, alleging that Delphi had violated its tenets by seeking additional financing from its former partner, General Motors Corp.

In addition to the allegations of the secret campaign, Delphi accuses Appaloosa chief David Tepper of misrepresenting his intentions to make good on the investment deal, and that the hedge fund tried to prevent the company from getting the debt financing it needed to escape bankruptcy.


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