Appaloosa Settled $2.5 Billion Lawsuit
November 3, 2009
An investor group led by hedge fund Appaloosa Management has settled a lawsuit stemming from its decision last year to back out of a $2.55 billion financing deal with then-bankrupt auto parts maker Delphi Corp.

Troy, Mich.-based Delphi, which emerged from bankruptcy earlier this month without the hedge fund’s help, announced the settlement, but did not say what it entailed. But Reuters reports that the deal involved a payment from the Appaloosa group to Delphi.

The hedge fund-led group agreed to provide the $2.55 billion in August 2007 as part of a $6.1 billion financing arrangement to allow Delphi to exit bankruptcy. But Appaloosa pulled out of the deal in April 2008, accusing Delphi of violating parts of the agreement by reaching agreements with its former parent, General Motors, “that are materially inconsistent with the agreement and the plan.”

Delphi countered that Appaloosa withdrew “simply because they decided they did not like the economics of the deal they had agreed to, and that they never intended to close if the deal was underwater.” Delphi sued the hedge fund and its partners in May 2008, asking a judge to force it to live up to its end of the bargain.

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