Delphi sues former investor

NEW YORK (AP) — Delphi said Friday it has sued its former lead equity investor, Appaloosa Management, for 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.

Delphi calls it “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 in jeopardy, causing further delay in a case that has been postponed 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 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.