The liquidation trustee for Saab Cars North America Inc. urged a Delaware bankruptcy judge Wednesday to compel Swedish parent Saab Automobile AB to hand over $4.2 million, funds that SCNA said are being held in defiance of its confirmed Chapter 11 plan.
SCNA paid $4.2 million to guarantee a loan taken by Saab and subsequently reached an agreement with the lenders that the U.S. unit would be repaid from collateral once its bankrupt parent satisfied the loan obligations, but the Swedish estate will not release the funds, according to a motion filed by trustee Edward T. Gavin.
The settlement, approved in July 2013 as part of the U.S. debtor’s Chapter 11 liquidation plan, must be enforced by the Delaware court because Saab’s receivers have refused to allow the payment, “instead suggesting that the SCNA trustee ‘file a proof of claim’ in the Saab AB bankruptcy proceeding in Sweden,” Gavin said.
The Delaware court has jurisdiction to enforce its own rulings and should order the funds to be transferred to the trustee, according to the motion.
A Saab subsidiary, Michigan-based SCNA sold and distributed vehicles to a network of North American dealers until being forced into involuntary Chapter 11 in January 2012, a month after the automaker filed for bankruptcy in Sweden.
SCNA was compelled as a guarantor of Saab’s 2010 loan to pay lenders Ally Financial Inc. and others $4.2 million to cover its parent’s debt, which was secured with by $23.6 million cash deposit, according to the trustee’s motion.
Ally and SCNA, who had been at loggerheads in the Chapter 11 case, eventually worked out a settlement in May 2013 that included the right for SCNA recoup the subrogation payment from the cash pool once Saab satisfied its obligations to the lenders, the motion said.
Those obligations were met this May and Ally gave the green light to release the funds in September, Gavin said, but Saab’s receivers declined to give their consent last week and said the matter must be handled by as a claim in Swedish court.
SCNA is the only party that has rights to the $4.2 million, and as such will be the only party harmed if those funds are withheld, the trustee said.
“If the motion is not granted, then the Saab AB estate will be unjustly enriched, because the Saab AB estate had no legitimate expectation of receiving the subrogation amount,” Gavin said.
Moreover, the U.S. unit is not required to resolve the issue in Sweden because the Delaware court has jurisdiction over SCNA and the settlement, which the receivers never objected to, Gavin said.
A hearing on the trustee’s motion is scheduled for Oct. 15 before U.S. Bankruptcy Judge Christopher S. Sontchi.
The trustee is represented by Christopher A. Ward and Shanti M. Katona of Polsinelli PCand Eric J. Snyder of Wilk Auslander LLP.
The case is In re: Saab Cars North America Inc., case number 1:12-bk-10344 in the U.S. Bankruptcy Court for the District of Delaware.