US hedge fund Appaloosa Management and its financial allies have dropped a plan to invest 2.55 billion dollars in Delphi Corp., which could have helped the auto parts maker emerge from bankruptcy.
Appaloosa's move to terminate the planned investment was divulged by Delphi in a regulatory filing with the Securities and Exchange Commission.
Delphi's management is seeking to restructure the firm so it can emerge from bankruptcy protection. The auto parts maker was spun off from General Motors in 1999, but remains the auto giant's largest parts supplier.
“GM is disappointed in the decision by Appaloosa and the plan investors to withdraw their support for Delphi,” GM said in a statement.
GM said it would continue working to try and help Delphi come out from court protection.
Appaloosa and its financial partners sent Delphi a letter Friday stating that they were backing out of the deal, saying the auto parts group had “breached” a number of provisions under an agreement covering the potential multibillion dollar investment.
The hedge fund said some of the claimed breaches related to accounting matters, but it said Delphi had also entered into employment agreements with senior executives that were unacceptable to Appaloosa.
Another hedge fund, Harbinger Capital Partners, as well as UBS Securities, Goldman Sachs and Merrill Lynch had formed part of the financing group supporting Appaloosa.
GM and Delphi have conducted tough negotiations, covering pay rates, health care and pension benefits, with union groups in the past year in a bid to improve Delphi's fortunes.
