The Royal Bank of Scotland is reported to have has sued Lear Corporation seeking at least $35.2m in a breach of contract lawsuit involving foreign exchange and other swaps.
The lawsuit, filed in US District Court in Manhattan late last week, alleges that Lear breached a credit agreement related to three types of derivatives transactions – interest rate swaps, commodities swaps and foreign exchange swaps. Lear failed to make the required payment – $35.2m, plus interest – before the designated termination date of 27 February, 2009.
According to the report, the complaint alleges Lear violated a leverage ratio covenant related to the credit agreement, giving RBS the right under the contract to designate an early termination date and receive payment in respect to all outstanding transactions.
Around the time the lawsuit was being filed, Lear told the US Securities and Exchange Commission (SEC) Key auto supplier it had reached an agreement with lenders for an amendment and waiver to its primary credit facility but might nonetheless have to file for bankruptcy protection.
“A default under our primary credit facility could result in a cross-default or the acceleration of our payment obligations under other financing agreements,” Lear told the SEC in a filing. “In any such event, we may be required to seek reorganisation under Chapter 11.”