Collins & Aikman receives court approval of settlement with GECC

By Caroline Salls

Pittsburgh, Oct. 16 - Collins & Aikman Corp. obtained court approval of a settlement with General Electric Capital Corp. that resolves outstanding issues associated with pre-bankruptcy receivables facility interests, according to a Friday filing with the U.S. Bankruptcy Court for the Eastern District of Michigan.

According to the motion, under a Dec. 20, 2001 receivables purchase agreement, the sellers, including Collins & Aikman Products Co., sold to Carcorp, Inc. all of their rights, title and interests in the receivables, related security and proceeds.

On Sept. 20, 2002, Carcorp transferred perfected security interests in the receivables, the related security and the proceeds to GECC.

On June 22, 2005, GECC filed an emergency motion for relief from the automatic stay asserting that Collins & Aikman had withheld information about the receivables facility interests and diverted some of the receivables to pay post-bankruptcy expenses.

Collins & Aikman objected to GECC's motion and alleged that GECC was withholding funds.

The company and GECC entered into a stipulation in July 2005, under which Collins & Aikman agreed to create a $5 million escrow account to secure amounts owed to GECC, but this stipulation did not resolve all of the outstanding issues.

In addition, on Aug. 4, 2005, GECC filed a motion to compel performance under the receivables transaction, in which it said Collins & Aikman had failed to collect receivables from some customers on GECC's behalf as allegedly required by the receivables transaction.

Collins & Aikman has disputed these allegations, and the motion has been pending since.

Under this new settlement, the parties have agreed that when the outstanding securitization obligations are less than the GECC deposit, Collins & Aikman will release the funds held in the GECC deposit account to the extent necessary to pay the outstanding securitization obligations.

All remaining amounts will be paid to Collins & Aikman.

After the release of the GECC funds, GECC will no longer be owed any securitization obligations and, accordingly, the receivables transaction and all related documents will be terminated.

Also, GECC will withdraw its legal actions to collect pre-bankruptcy receivables from some of Collins & Airman's customers.

Collins & Aikman, a Troy, Mich.-based automotive company, filed for Chapter 11 on May 17, 2005. Its case number is 05-55927.

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