Delphi court action against fund

Delphi had hoped to exit bankruptcy protection in 2008

US car part firm Delphi is taking court action against equity investor Appaloosa Management, for pulling out of a $2.55bn (£1.3bn) investment deal.

Delphi has been in Chapter 11 bankruptcy protection for more than two years, and last year said it was confident of exiting bankruptcy.

Central to that was a $7bn injection from banks, plus a $2.55bn investment from a group led by Appaloosa.

Delphi says Appaloosa's failure to do a deal has hit its bankruptcy exit plans.

In April the Appaloosa-led investor group backed out of the $2.55bn equity commitment, which Delphi had been counting on to support its emergence from bankruptcy.

The withdrawal came as US auto sales weakened, and a number of investment firms revealed continuing losses from the global credit crunch.

"This is a story of trust and betrayal," Delphi said in its filing with US Bankruptcy Court in New York.

Michigan-based Delphi has asked the court to order the investor group to provide up to $2.55bn in funding.

If the court does not order the investment group to provide the funding, then Delphi wants to be able to pursue damages at trial for breach of contract and fraud.

Appaloosa made no immediate comment on the legal move.