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Budd asks court to keep ThyssenKrupp from selling equity securities
By Kali Hays
New York, Sept. 22 – Budd Co. is seeking an injunction prohibiting ThyssenKrupp North America, Inc. from selling or transferring any Budd equity securities or altering a tax sharing agreement between the parties, according to an adversary complaint filed Sept. 21 with the U.S. Bankruptcy Court for the Northern District of Illinois.
ThyssenKrupp is the holder of 100% of Budd’s equity securities and is part of a group of corporations that files a single consolidated federal income tax return allowing them to offset taxable income in proportion to respective net operating losses.
Under the tax sharing agreement, Budd believes it will be entitled to significant future payments from ThyssenKrupp, but said that this potential right “could be irreparably reduced, impaired and/or destroyed as a result of certain actions ThyssenKrupp could take unless it is enjoined from doing so.”
Specifically, as the sole holder of Budd’s equity securities, ThyssenKrupp could sell 20% or more of its holdings to an entity that is not included in the tax sharing agreement and Budd would cease to be part of the affiliated tax sharing group.
“Even if ThyssenKrupp were to attempt to transfer less than 20% of Budd’s equity securities, such a loss could reduce dollar for dollar the amount of Budd’s net operating losses and thereby reduce the amount of payments Budd could receive in the future,” the complaint stated.
Budd asked the court to permanently keep ThyssenKrupp from selling any of the company’s securities and from modifying the original tax sharing agreement in any way without direct approval from the court.
Chicago-based Budd makes stainless steel rail cars. The company filed for bankruptcy on March 31 under Chapter 11 case number 14-11873.
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