In Re Bankatlantic Bancorp, Inc. Litigation
39 A.3d 824
Del.2012Background
- Bancorp, a Florida holding company, plans to sell BankAtlantic to BB&T in a structure that leaves Bancorp with Retained Assets LLC and no direct stake in BankAtlantic post-closing.
- The transaction is structured so that Bancorp conveys BankAtlantic stock and receives equity interests in Retained Assets LLC, which hold approximately $606 million of criticized assets.
- The Indentures prohibit transfer of substantially all assets unless the successor obligor assumes the Debt Securities; BB&T does not assume the Debt Securities.
- Retained Assets LLC would leave Bancorp with a radically different risk profile and would cause Bancorp to exit banking operations and regulatory oversight as a bank holding company.
- Plaintiffs (Trusteed holders of various TruPS) allege the Sale breaches the Successor Obligor Provision and would cause an Event of Default, causing acceleration and irreparable harm.
- The court concludes the Sale Transaction constitutes a breach, enjoins Bancorp from consummating the sale, and finds irreparable harm and an appropriate remedy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Sale Transaction breach the Successor Obligor Provision? | Trusts: sale transfers substantially all assets without a successor assuming debt. | Bancorp: structure preserves the enterprise's continuity and assets are not transferred as a whole. | Yes; Sale breaches the provision. |
| Is a permanent injunction warranted to enforce the contract rights? | Injunction required to prevent irreparable harm from default and preserve indenture rights. | Injunction would harm Bancorp and disrupt financial contracts; alternative relief possible. | Yes; balance of hardships favors injunction. |
Key Cases Cited
- Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982) (boilerplate successor obligor provisions protect continuity of assets)
- Bank of N.Y. Mellon Trust Co. v. Liberty Media Corp., 29 A.3d 225 (Del. 2011) (uniform interpretation of indenture provisions and boilerplate language)
- Concord Real Estate CDO 2006-1, Ltd. v. Bank of Am. N.A., 996 A.2d 324 (Del. Ch. 2010) (model indenture provisions; strives for consistency in interpretation)
- 407 E. 61st Garage, Inc. v. Savoy Fifth Ave. Corp., 23 N.Y.2d 275 (N.Y. 1968) (contract performance not excused by financial hardship; enforcement of contracts)