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Ryan Beene
Crain's Detroit Business
March 24, 2009 - 3:41 pm ET

Supplier Lear Corp. is being sued by The Royal Bank of Scotland PLC to recoup more than $35 million in unpaid fees after Lear defaulted under the terms of its credit agreement, according to the UK-based lending giant's lawsuit.

RBS is among the lenders in Lear's credit syndicate and the lawsuit could complicate the company's efforts to restructure credit lines, bonds and common stock. Lear disclosed those efforts last week in the supplier's annual financial report.

Lear owes RBS $35.2 million plus interest after the bank terminated an interest rate, commodity and foreign exchange swapping agreement with the suburban Detroit supplier of seating systems and electronics, RBS said in its suit filed last Thursday in the U.S. District Court in the Southern District of New York.

RBS filed the suit just days after Lear announced it had reached a short-term waiver with RBS and other lenders of its year-end 2008 default under its main credit facility, giving the supplier breathing room to revamp its capital structure.

"We don't understand their motivations for filing suit while at the same time participating in the waiver of the default," said Terry Larkin, Lear's general counsel.

RBS killed the swap agreement because of the default, RBS said in its complaint.

The default was triggered because Lear exceeded its debt-to-equity ratio. It was required to keep the ratio at a certain level under the terms of its credit agreement at the end of the 2008 fourth quarter.

Lear's default allowed RBS to cancel the separate swapping arrangement and immediately demand that Lear pay the outstanding amount it owed to RBS, the bank said in its complaint
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