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Saab wants to drive filing to Michigan

by Aviva Gat | Published February 8, 2012 at 5:14 PM

Saab Cars North America Inc. wants to change the venue of the involuntary bankruptcy case filed on its behalf, alleging the petitioners knew of its intention to seek bankruptcy protection in a different court before they sought to jumpstart the car company's liquidation.

Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware in Wilmington -- the site of the involuntary filing -- is scheduled to consider the venue transfer on March 2.

Saab's counsel, Joseph H. Huston of Stevens & Lee, said the debtor is hoping to accelerate the hearing to Feb. 23.

The U.S. arm of Swedish carmaker Saab Automobile AB requested its involuntary case be moved to the U.S. Bankruptcy Court for the Eastern District of Michigan in Detroit on Feb. 6 on the grounds that it intended to file a voluntary Chapter 11 petition in that district before the petitioners filed the involuntary case in Delaware.

Some 41 Saab car dealerships had filed an involuntary Chapter 11 petition against Saab in the Delaware court on Jan. 30. Thirty-nine other dealerships have since been added to the petition. Saab has 188 dealerships in the U.S.

Saab said in documents that it had notified the petitioners of its intention to file for bankruptcy on Jan. 27, asking the dealerships to keep the plans quiet. The dealerships, however, filed the involuntary case the next business day. Saab asserted that the petitioners' counsel believed Wilmington to be a more convenient setting than Detroit.

But Royal Oak, Mich.-based Saab disagrees. According to Saab, the petitioners hold less than 14% of Saab's debt and none are actually located in Delaware. The petitioners asserted claims totaling $1.23 million, while Saab estimated its liabilities closer to $8.9 million.

While it is incorporated in Delaware, Saab's principals and business operations are all in Michigan and proceeding through bankruptcy in Wilmington will incur significant travel costs, the company said.

Huston said he is unsure of the petitioners' response to the venue change. He does not expect their support given their decision to file in Wilmington.

Counsel to the petitioners, Leonard A. Bellavia of Bellavia Gentile & Associates LLP and Christopher A. Ward of Polsinelli Shughart PC, couldn't immediately be reached for comment on Wednesday.

Saab said that it has been addressing its wind-down since its parent sought bankruptcy protection in Sweden on Dec. 19. Saab retained turnaround management firm McTevia & Associates LLC to develop a plan and hopefully avoid a bankruptcy filing, documents show.

Avoiding bankruptcy was largely dependant on negotiations with secured lender Ally Financial Inc., which had sought to reclaim roughly 900 vehicles located in three U.S. ports. Saab had hoped to negotiate a settlement with Ally regarding the vehicles, but discussions broke down, leading Saab to notify the dealerships of its intention to seek court protection.

Ally has already requested relief from stay to take control of its collateral, which it believes to be worth less than the $61 million owed as of Dec. 27. According to the Feb. 7 relief from stay motion, Ally had already filed lawsuits in state courts in New Jersey, California and Georgia to take possession of the vehicles. Hearings in those courts were set to take place in February.

Ally has also asked the court to prohibit Saab from using cash collateral.

Both of Ally's motions will be considered during the March 2 hearing.

Documents show Ally supports the venue transfer, as does Saab's only other secured creditor, Caterpillar Logistics Services LLC.

Saab Automobile's Swedish bankruptcy came after preferred shareholder General Motors Co. vetoed its plan to sell to Chinese manufacturer Zhejiang Youngman Lotus Automobile Co. Ltd. and distributor Pang Da Automobile Trade Co., according to The Deal Pipeline.

Dutch high-end sports carmaker Spyker NV bought Saab from then-bankrupt General Motors Corp. in 2010. (GM became General Motors Co. after the automaker emerged from Chapter 11 in March 2011.) By last spring, Saab had run out of money, and it has produced few cars since April. The company could not meet its November payroll after an agreement was vetoed by GM over fears of technology leaks. Parent Spyker has since renamed itself Swedish Automobile NV.

Saab Automobile has 7 billion Swedish kronor ($1 billion) in debt, according to The Deal Pipeline.

Along with Huston, Thomas B. Radom of Butzel Long is also counsel to Saab.

Ally's counsel is Charles M. Tatelbaum of Hinshaw & Culbertson LLP and Scott T. Earle and James F. Harker of Cohen, Seglias, Pallas, Greenhall & Furman PC.

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Tags: Christopher S. Sontchi | Joseph H. Huston | Saab Cars North America Inc.

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