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Appaloosa Backing Down from Delphi Committee Battle
By Roberta C. YafieNEW YORK -- Appaloosa Management LLC, the Chatham, N.J., hedge fund and largest shareholder of embattled Delphi Corp., is expected to withdraw its motion demanding to be named to Delphi Corp's equity committee, The Business Journal has learned.An attorney for Appaloosa did not return a phone call for comment.Appaloosa holds approximately 9.3% of Delphi's shares.The motion, filed May 3 in U.S. Bankruptcy Court for the Southern District of New York, seeks to have U.S. Judge Robert Drain force the U.S. trustee to appoint Appaloosa to the committee. The motion claims that the U.S. trustee "abused its discretion in failing to appoint some or all of the shareholders to the equity committee."After the U.S. trustee failed to appoint Appaloosa to the committee, it formed an ad hoc equity group that includes Pardus Capital Management, with a stake of approximately 4.7%; Wexford Capital LLC, with 3.2%; and Lampe Conway & Co. LLC, with 1%. In court hearings earlier this month, Appaloosa's attorneys represented this group and its combined holding.Seven members were appointed April 28 to the equity committee, two investment funds and five individual shareholders, after an extensive canvas of all of Delphi's 300,000 shareholders. Shareholders were asked to return a questionnaire detailing their holdings, any claims they might have against the company and any stock transactions they may have made prior to and after Drain's March 22 bench ruling establishing the group.The trustee's office will not comment on any phase of the process.This month, one individual shareholder dropped out and was replaced by Pardus, according to a May 11 filing. Sources said this could play a role in Appaloosa withdrawing the motion.In addition to Pardus, the investment funds are Brandes Investment Partners LP, a San Diego, Calif., based investment firm that holds a 5.3% interest in Delphi and about 10% in General Motors Corp.; and D.C. Capital Partners LP of New York. Individual investors are Luqman Yacub of Hartville, Ohio; James E. Bishop Sr. of Laredo, Texas; James N. Koury, trustee of the Koury Family Trust of La Habra Heights, Calif.; and James H. Kelly of Boulder, Colo.Appaloosa was the driving force in the establishment of the committee, which gives shareholders a voice in Delphi's bankruptcy proceedings, similar to the role of the creditors' committee.But in the process, Appaloosa incurred Drain's wrath on several occasions, notably a letter sent by its president, David Tepper, to Delphi's board, that threatened a proxy battle and sought as many as four seats on Delphi's board, and concerns about a breach of confidential court documents. The latter refers to the electronic filing of a redacted document -- in this case, its reply to objections to its equity committee motion -- with large sections blacked out. The document was downloaded by some members of the financial press from the electronic filing system and converted to a format that revealed the confidential information.In the motion, Appaloosa called the disclosure "unintended and inadvertent." Access to the document was eliminated by the following day, it said.Drain did not take the mishap lightly, however. In his bench ruling, he advised the trustee to investigate "all facts relating to the apparent release of confidential information covered by the court's protective order in the prosecution of the (equity committee) motion" if Appaloosa applies to be appointed to the committee.Drain made it clear he did not want the committee bogged down with lawyers, bankers and actuaries, and that Delphi's workers -- also shareholders through their pension plan -- are at the heart of the matter. At the same time, Drain cautioned the committee to steer clear from participating in the negotiations between Delphi and its unions.The equity committee selected the New York law firm of Fried Frank Harris Shriver and Jacobson to represent it in the Delphi proceedings. To date, the court has not given its seal of approval to the firm, but sources expect that to occur shortly."