Hedge fund pulls out of $2.6B investment deal with Delphi

ByABC News
April 6, 2008, 12:08 AM

NEW YORK -- This GM didn't need.

"I would not be surprised to see additional forms of financial support from GM," Fitch Ratings analyst Mark Oline said. "It's been never-ending since the initial filing."

Standard & Poor's analyst Marc Eiger told investors that the sooner Delphi emerges from bankruptcy, the better off GM will be. He noted that GM recently increased the amount of loan money it offered to Delphi, and it "may need to provide more cash to help Delphi emerge."

As for an equity deal, Appaloosa said it is still negotiating to invest in Delphi despite its refusal to do so under the terms of the existing agreement.

GM spokeswoman Renee Rashid-Merem said it is disappointed Appaloosa had withdrawn. "There has been a tremendous amount of effort and progress made to establish the foundation that would enable Delphi to emerge from Chapter 11," she said in a statement. "GM will continue to work with the involved parties to facilitate Delphi's efforts to emerge from bankruptcy."

Appaloosa's announcement came as Delphi faced a Friday deadline to raise $6.1 billion in loans to help it out of bankruptcy. Delphi followed Appaloosa's statement with its own, saying it had raised the needed loan money and was ready to do the deal but that Appaloosa had backed down.

"We are extremely disappointed that our plan investors have taken the position that they are not obligated to fund their planned investment commitments to Delphi and instead have chosen to walk away from the company and its stakeholders," Delphi's restructuring chief, John Sheehan, said in a statement. "We are prepared to pursue actions that are in the best interests of Delphi and its stakeholders."