Client: A well-known hedge fund.
Issue: Our client was accused of a loan-to-own motive, having made a six-figure loan to a company that allegedly was insolvent and obtaining a board seat in the process. The borrower defaulted, and our client credit bid its secured claim in the ensuing Chapter 11 case.
Challenge: The Creditors Committee sued, arguing that the credit bid should not be allowed because the client’s loan-to-own strategy was wrongful and the claim should either be recharacterized as equity or equitably subordinated. The Committee also sought deepening insolvency damages on a breach of fiduciary duty and aiding and abetting theory.
Solution and Result: Rather than settle, as so many cases do, we took the case to an expedited two-week trial and won on all counts in a lengthy, published post-trial opinion.