West Palm Beach (HedgeCo.Net) – Delphi is going forth with investigations to reveal whether or not the hedge funds supporting their $6.1 billion refinancing did in fact, short their stock.
The bankrupt auto-parts maker has accused members of Appaloosa Capital Management, along with other investment firms, of using short-selling activities with the anticipation that the $2.55 billion deal with which the firms had promised Delphi, would fall through.
In papers that Delphi filed with the U.S. Bankruptcy Court in Manhattan, the company claims that “at least six investors have either acknowledged some short-selling activity or have refused to cooperate with the…investigation.”
"Delphi has a fiduciary responsibility to evaluate information received by the company which may materially affect the best interests of the company and its stakeholders in the Chapter 11 cases," said Delphi attorney Jack Butler in a letter to Appaloosa.
Other investment firms involved in the investigation include Harbinger Capital Partners, Merrill Lynch, Pardus Capital Management, Cerberus Capital Management, UBS and Goldman Sachs.
It has become increasingly unclear as to whether Delphi was going to pull off their exit refinancing strategy to lift themselves out of Chapter 11. Appaloosa, along with the other firms, agreed to extend the $2.55 billion, but are legally allowed to walk away if Delphi cannot secure the rest of the money needed by April 4th. A GM affiliate has agreed to extend the company a $2 billion piece of the pie, another factor in which Appaloosa is less than thrilled about.
Lawyers for the hedge fund say they were concerned about GM’s influence over Delphi, saying that the loans would "adversely affect the company and the investors by materially increasing and concentrating GM’s ongoing influence and control."
However, this only further fueled speculations that Appaloosa was looking for any excuse possible to walk away from the deal, an allegation that they repeatedly deny.
The bankruptcy judge has granted Delphi permission to subpoena any investors they feel might have been involved in short-selling.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net
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