Appaloosa Management has asked bankrupt auto parts maker Dana Corp to terminate its court-approved $750 million rights agreement for a private equity infusion led by Centerbridge Capital Partners LP. Appaloosa — owner of nearly 15 per cent of Dana''s pre-bankruptcy stock as well as pre-petition debt, objected to the deal.

Other creditors were also unhappy with the rights offering. As an alternative, Appaloosa has pushed an alternative offering including a $1.5 billion exit loan and a commitment for $750 million in equity financing.

In a 17 August letter Appaloosa has filed with the Securities and Exchange Commission (SEC), Chatham, New Jersey-based hedge fund has asked Dana''s board to terminate its rights agreement, or at least to make it inapplicable to shareholders seeking an alternative to management''s present plan.

Dana''s deal with Centerbridge includes a commitment to buy $300 million of 4 per cent Series A convertible preferred stock and $200 million in 4 per cent Series B-1 convertible stock that isn''t acquired by creditors. It also requires Dana to replace its healthcare and long-term disability obligations for retirees and union-represented employees with trusts.

The auto parts maker would put up $700 million in cash and $80 million in common stock — as well as part of the Centerbridge capital — to fund those trusts.

Dana filed for bankruptcy protection in March 2006 in the US Bankruptcy Court for the Southern District of New York. The company hopes to file its plan of reorganization by early September and exit Chapter 11 in the first half of 2008.