The deal that would have rescued Delphi court from bankruptcy is off, as the hedge fund that was leading an investor group backed out.

Appaloosa Management said in a regulatory filing that it has terminated its agreement to invest $2.55 billion in the auto-parts supplier. The hedge fund, founded by David Tepper, made the announcement on the first day it could bail out of the deal if Delphi had not raised $6.1 billion in loans to help it emerge from bankruptcy, according to the Associated Press.

The investor group, which also includes Harbinger Capital Partners, UBS Securities, Goldman Sachs, and Pardus DPH Holding, asserted in the filing that Delphi breached its agreement with it. The group accused Delphi of making deals with onetime parent General Motors that were “materially inconsistent” with the agreement, that were outside the ordinary course of business, and that would have a material impact on the investors. Also, the investors claimed, Delphi entered into unacceptable employment agreements and other compensation arrangements with senior management. As a result, the investors said they are entitled to be paid an alternate transaction fee of $82.5 million and other transaction expenses.

The long-delayed Delphi reorganization has generated acrimony between the investor group and the company. Last month a Delphi lawyer claimed that at least one member of the group had been trading or shorting the company’s public securities.

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