Vol 3 (2006) - Issue 2

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Re Collins & Aikman Corporation Group

On 15 July 2005, the High Court heard an application for administration orders over 24 companies in the Collins & Aikman Corporation Group spread out over a number of European countries. One of the companies is incorporated in Luxembourg, six in England, one in Austria, four in Germany, two in Sweden, three in Italy, one in Belgium, four in the Netherlands and one in the Czech Republic.
The Group is a leading global supplier of ‘automotive component systems and modules’1 with headquarters in Michigan, operating in 17 countries throughout the world with 23,000 staff. In Europe it operates in 10 countries with 4,500 staff. It encountered financial difficulties
as a result of an increase in commodity prices, downward pressure on prices from customers and high levels of leveraging.
As a result, the Group’s operations in the US filed Chapter 11 proceedings in May 2005. Following that filing, the European operations experienced increased pressure with the result that they were about to be become cash-flow insolvent by the end of July. The European operations had by the time of the hearings some USD 227m of third party liabilities, comprising USD 160m of trade debts, USD 50m of potential pensions liabilities and the balance in debts to JP Morgan and Porsche. Some of the European companies were by then balance sheet insolvent. Inter-company debts totalled USD 977m of which USD 328m was owed to companies outside the European part of the Group.
Because of the complex inter-company debts, it appeared that each of the European companies was likely to become unable to pay its debts.
The issue which fell for determination was where the centre of main interests of the European companies lay. Interestingly, Ford Motor Company appeared on the applications to ask for an adjournment in order to consider its position as a potential creditor. It drew to the Court’s attention the fact that petitions had been presented in Germany that morning by two German companies against one of the German Group companies and that a German judge was considering whether to notify that company of the proceedings, by which act he would be accepting that the German Court was competent to determine the centre of main interests.
By Article 13 of the EU Regulation, the centre of main interests of a company should ‘correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties’.