Edscha North America, Inc. d/b/a Edscha USA (“Edscha North America” or the “Debtor”) filed for bankruptcy on October 19, 2009 leaving Ford, General Motors, Nissan and Mercedes on its top 20 unsecured creditor list for accommodation payments made to keep the Debtor going. The OEM unsecured creditors’ and other unsecured creditors’ chances for any recovery of pre-petition claims appear to be slim.
The bankruptcy was filed in the Bankruptcy Court for the Bankruptcy Court for the Northern District of Illinois (case number is 09-39055) for relief under Chapter 11 of the US Bankruptcy Code.
Background of the Debtor
Edscha North America US operations are headquartered in Pontiac, Michigan. Edscha North America is the US subsidiary of the German company Edscha AG. Until recently, the Edscha AG group of companies was the world’s leading maker of convertible roofs, hinge systems and driver controls for most major carmakers.
The United States operations of Edscha AG were expanded in July 2000, when it purchased all the shares in the hinge specialist Jackson Automotive Group, Inc.
In December 2002, EdCar Beteiligungs GmbH & Co. KG, a holding company controlled by The Carlyle Group, took over 70.5 percent of the share capital of Edscha AG. In 2004, that stake was increased to 100 percent.
A victim of the 2008 dramatic drop in automotive sector demand, Edscha AG filed for insolvency under German law on February 2, 2009. Since its filing, Edscha AG’s administrator has sold off its two major business units. In August, 2009, German supplier Webasto acquired the convertible roof systems business unit. On October 10, 2009, Spanish automotive supplier Gestamp Automocion acquired the body components business.
The US bankruptcy filings show that prior to the commencement of the German insolvency proceedings, Edscha AG pumped in and left in its North American subsidiary more than $36 million. Edscha AG is the largest unsecured creditor listed in the schedules attached to the bankruptcy petition.
Secured Debt Picture; Trade Debt
HVB Banque Luxembourg Societe is listed as holding a secured claim of $441,110,271 on “specific assets” and Intermediate Capital Group PLC is listed as holding a subordinated secured claim of $187,303,019. Based on the information provided in the initial filings, both of these creditors would seem to be substantially under collateralized. However, various affiliates of the Debtor also are obligated on certain of these loan amounts. The extent to which collateral of these other co-debtors is available to satisfy the secured claims is unknown.
The petition schedules list total assets of $6,438,346 and total liabilities of $672,357,562. Total liabilities consist of secured claims of $629,228,096 and unsecured claims of $43,129,465. If the unsecured claim of the parent, Edscha AG is excluded, there are unsecured claims of slightly in excess of $7 million. The OEMs hold more than $2.5 million of these claims due to accommodation payments to the Debtor’s suppliers. (The Debtor’s schedules refer to those payments as “hostage payments.”)
Prospects for Pre-Petition Claims of Suppliers
A liquidation of Edscha North America, whether by way of sale as a going concern or otherwise, seems unlikely to result in a distribution to the trade creditors. As of the time of this initial post, there is no indication of any possibility of a Section 363 sale. If there is such a sale, it is likely that the only suppliers who will see any payment of pre-petition claims will be those with executory contracts that are assumed and assigned under Section 365. Since the Debtor’s schedules list no supplier executory contracts, that possibility also seems remote.
In a case where supplier prospects are so bleak, there at least appears to be one bright spot. The schedule of potential bankruptcy preference payments (i.e. those payments made in the 90 days prior to bankruptcy) is remarkably short for a bankruptcy of this size.
Top 20 Unsecured Edscha North America Creditors
Edscha North America has listed the following creditors as being its top 20 largest unsecured creditors. As mentioned above, the list does not include secured creditors who are under collateralized.
|Name of creditor||Nature of claim||Claim is contingent, unliquidated, disputed, or subject to setoff||Amount of claim|
|Ford Motor||Subrogation rights due to hostage payments||$1,366,199|
|General Electric Capital Corp||Abandoned collateral 9/15/09 (Title to property will be determined post-petition.)||Disputed||$1,131,700|
|General Motors||Subrogation rights due to hostage payments||$656,113|
|2880 Centerpoint Investments LLC||Landlord at 2800 Centerpoint Parkway, Suite 100||$470,318|
|Nissan Motor||Subrogation rights due to hostage payments||$348,021|
|Mercedes||Subrogation rights due to hostage payments||$214,696|
|GE Capital||Through 9/10/09 U251 – $175,413.50 Furniture – $20,300.90||$195,714|
|A.V. Gauge & Fixture||Customer tooling||Disputed||$113,480|
|Detroit Testing Laboratory, Inc.||Judgment creditor||$94,000|
|Chrysler LLC||Subrogation rights due to hostage payments||$90,030|
|Accident Fund Insurance||Workmen’s Compensation Claims Payments||$69,646|
|St. Paul Travelers||Workmen’s compensation insurance claims payment||$62,492|
|CEF & Associates||Commission Agreement||Disputed||$49,299|
|REINFRO LLC||Zinc plating||$36,311|
|Lee Industrial Contracting||Compressor repair and installation of chamber||$34,584|
|STS Manufacturing, Inc.||Zinc plating||$34,049|
|CLEVELAND DIE & MANUFACTURING||$29,750|
|HEICO UMFORMTECHIK||Raw material||$29,734|
|SPRING ENTERPRISES LLC||Raw material||$29,564|
The Top 20 List does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.
The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.