Trilogy Portfolio Company, LLC v. Brookfield
Real Estate Financial Partners, LLC, C.A. No. 7161-VCP (Del.
Ch., Jan. 13, 2012), read opinion here.
Whether the restructuring of a $2.7 billion mortgage loan
secured by the Atlantis Resort and Casino in the Bahamas created the necessary
type of irreparable harm to the lenders which warranted a TRO.
The creditors of a multi-billion dollar loan secured by
the Atlantis Resort and Casino in the Bahamas sought expedited injunctive
relief to stop a proposed restructuring of a loan which would forgive the debt
owed to the junior-most note holders in exchange for an 100% equity interest in
the borrower. Holders of the more senior notes claim that the proposed
transaction would unfairly benefit the junior holders of the debt at the
expense of the more senior holders and in direct contravention of the terms of
the agreements controlling the debt. The senior holders also sought a TRO
on the basis that they would suffer irreparable harm based on the loss of
certain rights and the loss of certain guarantees under the terms of the
proposed new loan.
This 23-page decision provides a thorough summary of the
multiple parties involved and the different layers of creditors and how each of
them would be impacted by the proposed transaction.
The verified complaint in this action was filed on
January 4, 2012, along with motions for TRO and expedited proceedings.
Responses were filed on January 9, 2012 and a reply brief by the plaintiff was
filed on January 10, 2012. The Court heard oral argument on the TRO
motion on January 11, 2012.
Contentions of the Parties
Plaintiffs argued that the proposed transaction was
unfair to the creditors and that the proposed loan restructuring would provide
a valuable equity interest in the borrower while unfairly transferring
substantial risk to the other creditors. The plaintiffs alleged that the
restructuring would violate contractual rights, as well as breach fiduciary
The Court recited the familiar prerequisites that need to
be satisfied for a TRO and its "less exacting" scrutiny based on the limited
factual record generally available at such an early stage of an expedited
proceeding. See footnotes 7 through 12.
Contrast this standard, however, with a factual record
that is more fully developed, in which event "the traditional temporary
restraining order standard is not fully applied and the Court considers whether
there is a probability of success on the merits." See footnote
13. In this case, the Court found that the plaintiffs satisfied the
prerequisits for a TRO. The Court required a bond pursuant to Court of
Chancery Rule 65(c) in the amount of $100,000 secured, and rejected the request
of the defendants that the bond be in the amount of $230 million.
The Court scheduled a preliminary injunction hearing for
January 27, 2012, and made the TRO effective immediately.
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