*1 In re HENNEPIN COUNTY
RECYCLING BOND
LITIGATION. C0-93-2251, C4-93-2253 Nos.
and C6-93-2254. Supreme of Minnesota. Court 9, 1995.
Nov. *2 Pentelovitch, Herr, Z. David F.
William Holappa, Minneapolis, Susan D. for Henne- pin County. Hinderaker, Michel, Cecilia M.
Allen W. Ellis, Minneapolis, Hennepin M. for Denise Energy Resource Co. Ross, Voelbel, Thomas Dar-
Richard Jeff den, Levy Hopeman, Ann Robert Jon San- ford, Cambronne, Bear, Karl Minne- Stuart Reinhardt, Wilkinson, apolis, Mark Gavin St. Paul, respondent. for III, Humphrey, Attorney Hubert H. Gen- eral, Eller, Attorney B. Assistant Christie General, Paul, Curiae, for Amicus State of St. Minnesota. Martin, Hansen, Robyn Grego-
Richard H. Curiae, Poe, ry Minneapolis, City Amici Paul, City Minneapolis, Metropolitan of St. Council, Community Develop- Minneapolis Agency, of Minnesota ment the Association County Attor- Counties and the Minnesota neys’ Association.
OPINION
STRINGER, Justice. action arose when defendants This class County (County) Hennepin Hennepin Co., Partnership Energy Limited Resource defendants) (HERO) triggered (collectively, $124,000,000 mandatory redemption of over by declining renew- to seek revenue bonds backing the bonds. al of a Letter determine whether granted We review to (hereinafter, bondhold- plaintiff bondholders ers) for breach of properly stated claims provisions in express implied contract the bondholders agreements bond between conclude that the bond- and defendants. We express claims for breach holders’ provisions are sufficient to implied contract motions to dismiss withstand defendants’ 12.02(e). Accord- pursuant to Minn.R.Civ.P. part and reverse ingly, we affirm appeals, court of the decision of the time, HERC, County, proceedings in accor- same USTC further remand for County Assumption, Assign- opinion. entered into the dance with this (Assump- and Amendment ment issued October On consenting Agreement), tion to the terms of $129,250,000 tax-exempt, long-term reve- Agreement. the Lease *3 Hennepin County known as the nue bonds Recovery Refunding Waste Resource Solid 7, 1992, January County’s financial On (recycling Bonds Series 1986A Revenue advisor, noting a dramatic decline market bonds) construction of a solid to finance rates, County interest recommended recovery facility disposal waste and resource obligations respect to refinance its with Minneapolis. Defendant near downtown recycling facility by permitting the Letter of (also Company in the HERC referred new, expire issuing Credit to lower inter- Agreement), partnership, con- Loan a limited 31,1992, July apparently est-rate bonds. On own, construct, County tracted with persuaded prudent was a course of this facility. operate recycling An under- action, County that it notified the banks writing syndicate purchased and offered the approve not an of or a re- would extension public pursuant to an Official bonds placement existing for the Letter of Credit. 1, 1986. Statement on October 8, 1992, approximately September On County permitted the Letter of Credit County recycling bonds The issued the expire, triggering mandatory an event re- including pursuant documents to several demption pursuant of the bonds to Section certificates, Statement, the Official a bond Agreement 4.07 of the Loan and Section Agreement County and between the 3.01(e) of the Trust Indenture. The Trustee HERC, and a Trust Indenture between the thereupon sent the bondholders a Notice of Agree- and the Trustee. The Loan Redemption with an effective date of October and Trust Indenture were entered into ment 9, 1992. (collective- 1,1986 simultaneously on October ly, agreements), bond and the bond certifi- 9, 1992, By had October bondholders expressly incorporate agree- these cates surrendered their bonds and the re- ments. par plus through deemed them at interest 9, premium paid. October 1992. No was recycling were secured a bonds backing The Letter of Credit the bonds ex- by Banque Indosuez Letter of Credit issued 15, pired on 1992. October (banks) 8, Lyonnais on October 15, expire scheduled to on October In the fall of the bondholders filed separate complaints three class action consolidated, against defendants. A amend-
The bonds matured on various dates be-
complaint
April
ed class action
was filed
tween 1995 and
but the Trust Inden-
contract,
alleging breach of
breach of
gave the
ture and the Official Statement
implied
good
an
faith and fair
covenant of
right to
the bonds before
redeem
claims,
dealing, various fraud and securities
percent
maturity upon payment of a two
seeking
premiums
future interest
premium redemption
occurred on October
redemption.
lost as a result of the
1, 1996,
the earliest date
could
payments scaled down one-
occur. Premium
Both defendants filed motions to dismiss
percent
year
half
each
thereafter until Octo-
12.02(e),
pursuant
to Minn.R.Civ.P.
with re-
1, 2000, the first date the bonds could be
ber
spect to the breach of contract claims and the
County paying
pre-
redeemed without the
implied
claims for breach'of an
covenant of
mium to the bondholders. The bonds had
good
dealing.
faith and fair
Defendants also
triple-A
rating.
credit
procedural
for dis-
asserted several
bases
missal,
20, 1989,
juris-
including
sold
lack of
matter
On December
HERC
diction,
recycling facility
Trust
and moved to dismiss the securities
to the United States
(USTC)
procedural
Company
York
and simulta-
and fraud claims. The
claims and
of New
neously
facility pursuant
before
leased back the
to a
the securities and fraud claims are not
(Lease
agreement
Agreement).
appeal.
At the
the court on this
lease
implied
that the bond
court of
declined to reach the
court concluded
The district
appeal
Id. This
duty upon
covenant issue.
followed.2
imposed
express
no
agreements
of the Letter of
defendants to seek renewal
urge
The bondholders
us to review
court also found that
Credit. The district
appeal
summary judg
from
this ease as an
although
agreed to use “best efforts
HERC
appeal
ment rather than an
from a dismissal
the Letter of Credit
to renew or extend”
12.02(e)
pursuant
to Minn.R.Civ.P.
because
20, 1989,
Agreement of
the Lease
December
they provided the district court with an ex
USTC,
not with the
HERC contracted
pert
Generally,
affidavit.
the court
not
bondholders,
Agreement
and the Lease
was
consider extrinsic evidence on a motion to
to the bond
not identified as
amendment
12.02(e).
dismiss
to Minn.R.Civ.P.
Accordingly,
court
agreements.
the district
“If,
provides:
Rule 12.02
on a motion assert
concluded that the Lease
did
*4
ing
pleading
that
the
to
the defense
fails
agreements and declined to
amend the bond
grant
can
state a claim
which relief
be
Agreement
Lease
for
construe clauses
the
ed,
pleading
present
matters outside the
are
the bondholders. The district
the benefit of
court,
by
ed to and not excluded
the
the
express
the bondholders’
court dismissed
summary
motion shall be treated as one for
claims,
permitted
of contract
but
the
breach
* *
judgment
with Rule
Consistent
for
to maintain their claims
bondholders
12.02,the district court did not consider in its
implied
good
of
faith
breach of an
covenant
expert
order the
affidavit and other matters
dealing.1
and fair
pleading
by
extraneous to the
offered
the
bondholders,
required
thus was not
to
ap-
Both the bondholders and defendants
summary judg
for
treat
the motion as one
County challenged
pealed. The
the court’s
ment.
jurisdiction,
matter
and both the
County
challenged
the
and HERC
whether
The bondholders also contend that
properly
claim for
bondholders
stated a
should have been treated as
the dismissal
good faith
implied
of an
covenant of
breach
summary judgment
the district court
because
dealing.
bondholders chal-
and fair
The
agreements in
considered the bond
their en
lenged
court
whether the district
erred
tirety,
merely
rather than
the
cit
dismissing
express contract claims.
their
complaint.
ed in the bondholders’ amended
dismiss, however,
deciding
to
the
a motion
Reversing the district court’s resolution of
the entire written con
court
consider
dismiss,
to
court of
the motions
complaint
tract
refers to the con
when
ambigu-
agreements
that
were
held
the bond
tract and the contract is central to the claims
respect
to
duties con-
ous with
defendants’
Corp.
alleged.
Venture Assocs.
v. Zenith
See
Credit,
cerning
of
of
renewal
the Letter
(7th
429,
Sys. Corp., 987 F.2d
431
Cir.
Data
respect to
defendants’ conduct
whether
1993); Teagardener
Republic-Franklin
v.
In re
constituted a breach of those duties.
(6th
Plan,
947,
Inc. Pension
909 F.2d
949-50
Hennepin County
Recycling
1986
Bond Liti-
denied,
Cir.1990),
1027, 111
498 U.S.
cert.
gation,
(Minn.App.1994).
67
517 N.W.2d
(1991).
Accord
S.Ct.
501 premium. payment without Conse- permitting the agreements, in the bond tion prior quently, to the hold that the bondholders stated option its we County redeem at willing granted 1, 2000, maturity if it which relief could be were a claim October so, simultaneously regarding express but breach of contract premium to do pay a expi- County County. at the against to redeem claim permitting the without the Letter ration of simply fails to see the actions The dissent by blocking renewal simply premium penalty, they County here for what are: of the Letter of Credit. of the or extension of the obstruction of the issuance intentional opin with our is consistent Our conclusion premi- to obtain a renewed Letter Credit Center, Corp., 298 Inc. v. Space ion years redemption, nine before matu- um-free (Minn.1980), where this court N.W.2d 443 optional right rity years and four before party to a of whether a the issue addressed premium for a accrued. This is to redeem by affirma performance contract could avoid redemption, nothing optional than an more happening of a condition tively blocking the ample instruction in the for which there is “ ‘[A] that it could not. precedent. heldWe when, how, and at agreements as bond obligation to into an party who has entered occur, masquerading as a price what it can up his own permitted to set pay will not be dis- mandatory redemption. We believe the same, unless voluntary default to defeat may seriously the in- reading distort sent’s ap unequivocally clearly and such intention rights parties of the their tention (quoting at 449 contract.” Id. pears’ se, responsibilities, inter and for this reason Co., 194, 195, 42 Minn. v. Paul Inv. Dana St. right have concluded that (1889)). N.W. ambiguous. redemption is trigger observed, Further, appeals court of as the held Because the court Agreement provides of the Loan Section 4.07 Assump Agreement and that the 1989 Lease Company if mandatory redemption “[t]he bond Agreement amended the earlier tion to the have furnished the Banks shall not briefly this issue for agreements, we address * * * Letter of [of Trustee extension trial providing guidance to the purposes of County, Hennepin In re Credit].” considering this matter on remand.8 court in added). plain (emphasis at 65 N.W.2d suggests language of 4.07 a sale and lease- HERC executed exists, pursu- option recycling facility to renew the Letter Credit to USTC back contends, belongs to HERC Agreement. In Section as Lease ant to the banks, County.7 par- of the 1989 Lease 13.13 follows: agreed ties appeal on this the record before us On use dismissal, and the Lessee shall Lessor [T]he conclude that a Rule 12 we from whenever re- best ambiguous their reasonable agreements are at least the bond efforts effect, procure a renewal or extension can, quired to turn as to whether issuance of an or the protec- the Letter intended for the bondholders’ a shield *8 timely Facility on a basis County, permitting Alternate Credit the tion into a sword for of expiration of the Letter maturity prior to the bonds before redemption of the Indenture, and the remainder County’s argument 12.04 of the Trust reject that Section 7. We the requirements for the Agreement them com- 6.13 describes accords of Section 6.13 of the Loan financing. Arguably, 6.13 deciding to renew the Section plete in whether discretion alternative obligation upon to ensure imposes Letter of Credit. defendants an extended Letter the renewed or that the terms of requires Agreement Loan 6.13 of the Section protect the bondhold- are sufficient to of Credit agreement and HERC of both the investment. ers’ acceptance of credit. prior of a renewed letter to surrounding provisions, Read in context of did that the bondholders 8. Defendants contend require appears to to defendants Section 6.13 incorporated into the was not assert Lease any of the Let- renewal or extension ensure that However, agreements. the bondholders bond complies financial re- with certain ter of Credit Section 13.13 plead the connection between did example, 6.12 de- quirements. Section For agreements Agreement the bond of the Lease Replacement Credit requirements for scribes Complaint. Class Action their Amended pursuant Section in to the terms of Enhancement 502 any Facility disagree appeals.
Credit or Alternate Credit We court of First, obligation then effect. HERC’s to use its “reason- able best efforts” under Section 13.13 added.) (Emphasis Agreement procure Lease to renewal County simultaneously executed the exclusively Letter of Credit is owed to the Assumption Agreement, recognizing the Trustee, USTC, Owner not the bondholders. Agreement Lease between HERC Plumbing Regents See Buchman Co. v. 3.1(d) addition, USTC. Minn., Univ. 298 Minn. 215 N.W.2d Assumption Agreement grants USTC certain (1974). 3.1(d) Moreover, 479 under Section Loan, rights regarding prepayment of the to Assumption Agreement as- USTC the exclusion of HERC: right, sumed the sole to the exclusion of HERC, to decide whether to consent to re- [T]he Owner Trustee shall have the sole newal of the Letter of Credit (but right, Company to the exclusion of the original Agreement. Section 6.13 of the Loan provisions to the Section 13.13 Thus, USTC’s decision to seek renewal of the Lease, parties to which the hereto here- Letter Credit under Section 6.13 was a (i) consent), prepay Loan precedent condition that never occurred to require redemption pur- of the Bonds obligation HERC’s to use its “reasonable provi- suant to and in accordance with the best efforts” under Section 13.13 of the Original sions of Section 4.06 of the Loan Agreement. Lease (ii) Agreement, to consent to or direct Second, the definition the term “Bond of the Bonds Agreement Documents” in the Lease accordance with does of such Sec- * * * (v) itself, not tion, Agreement refer to the Lease nor agree renewal of Assumption Agree- does Article IV borrowing the Letter of to make a ment, entitled Original “Amendments to agree of the Term Loan or to furnish or Agreement,” incorporate Loan Section 13.13 financing an alternative accordance with Agreement. of the Lease Accordingly, we Original Agree- Section 6.13 of the Loan agreements conclude that the 1989 do not ment. original agreements amend the bond to im- added.) (Emphasis pose duty upon defendants to seek renewal The district court observed that the Lease of the Letter of on behalf of the Agreement any way was not identified bondholders. original agree- amendment to the bond Finally, we consider whether the ments, and that the bondholders were not bondholders stated claims for breach of an third-party agree- beneficiaries of the 1989 implied good covenant of faith and fair deali agreements ments because the among were ng.9 law, every Under Minnesota contract HERC, County, Thus, and USTC. there implied good includes an covenant of faith was no reason to construe Section 13.13 of dealing requiring and fair party that one Agreement the Lease for the benefit of the “unjustifiably party’s hinder” per the other bondholders. formance of the contract. Zobel & Dahl reversed, holding (Minn. The court of Crotty, that Constr. v. 356 N.W.2d 45 1984); Section 13.13 of the 1989 Lease Stokely-Van see also Camp, Haase v. Inc., amended respect 7, 13, HERC’s duties with 257 Minn. 99 N.W.2d original (Second) Agreement. (1959); Hennepin In re Restatement of Contracts (“Because (1981). County, § at Similarly, N.W.2d we have held that *9 parties expressly consented to party [the “reason- to a contract cannot take advan language tage efforts”] able best in the Amended precedent failure of a condition Agreement, provision this became an party when the itself perfor has frustrated operational and, agreements Center, of the bond Space mance of that condition. 298 therefore, duties.”). 449; defines HERC’s Chirpich, N.W.2d at Nodland v. 307 Minnesota, appellate In courts review ment of a case before the court. Minn.RXiv. involving affecting judg- App.P. order the merits or 103.04.
503 PREMIUM, ANY, IF AND INTEREST 366-67, 516 240 N.W.2d Minn. AN DO NOT CONSTITUTE (Minn.1976). THEREON THE COUNTY INDEBTEDNESS OF good Minnesota, of implied covenant THE MEANING OF ANY WITHIN not extend to dealing does and fair faith PROVI- CONSTITUTIONAL STATE underlying scope beyond actions LIMITATION SION OR STATUTORY Here, however, the bondholders’ contract. OR GIVE AND DO NOT CONSTITUTE based on the claims are implied covenant THE A CHARGE AGAINST RISE TO allege To an agreements. underlying bond GENERAL CREDIT OR COUNTY’S need the bondholders implied covenant claim ADDITION, THE POWER. IN TAXING of con- express an breach first establish not PARTNER- OF THE OBLIGATIONS indeed, an claim for breach of tract claim— THE AGREE- SHIP UNDER LOAN faith and fair deal- good covenant of implied HEREIN ARE MENT REFERRED TO parties did implicitly assumes ing THE PART- PAYABLE ONLY FROM alleged- expressly articulate the covenant not IN- AND PARTNERSHIP NERSHIP Life, F.Supp. Metropolitan ly breached. ARE AND ASSETS AND NON- COME Here, properly bondholders at 1516. EN- AGAINST BLOUNT RECOURSE implied an cove- claim for breach of stated a CORP., OTHER ERGY RESOURCE dealing, ac- fair and good faith and nant of THE PARTNERSHIP PARTNERS OF this court on cordingly, we affirm the district BLOUNT, INC. AND issue. part, part, reversed Affirmed page also describes the Letter The face proceedings. for further remanded the effect of its termination: Credit and Payment principal of the Series COYNE, (dissenting). Justice at the stated maturities Bonds when due sure, the respectfully To be I dissent. thereof, upon acceleration or Indenture, Statement, the Loan Official redemption, and interest accrued thereon documents to and the other Agreement, an payable proceeds from the will be distinctly tough made are which reference is irrevocable, direct-pay Letter of read, documentation involved as is the herein, issued simulta- described be reading But types of investments. similar delivery 1986A neously of the Series ambiguity, and difficulty is not the same as by the New York Branches Bonds judge, nothing I court see like the district dealing with ambiguous about CREDIT LYONNAIS and the expiration of Letter of Credit BANQUE INDOSUEZ of the bonds on ter- mandatory redemption of Credit unless mination of the Letter bank, jointly severally, obligating each provided. Facility has been Credit Alternate principal of pay equal to the an amount capital letters on the face Printed in all the out- days’ interest on up issued page of the Official Statement Letter 1986 Bonds. The standing Series following description is the unless HERC1 expires on October Credit its bonds: in accordance with earlier terminated is not ex- Letter ARE terms. BONDS THE SERIES 1986A If Facility is and an Alternate Credit THE tended OF LIMITED OBLIGATIONS outstanding Series provided, all COUNTY, FROM PAYABLE SOLELY mandatory re- subject to be THE Bonds will IN THE SOURCES SPECIFIED Let- demption upon the termination HERE- REFERRED TO INDENTURE (Emphasis supplied.) AND ter Credit. 1986A BONDS IN. THE SERIES Hennepin Energy Co. is Resource majority opinion Statement has chosen 1. Because the Agree- "Partnership” Hennepin Energy in the Loan identify Resource defendant called the HERC, Partnership by "Compa- its initials Limited called the Co. Indenture it is ment and the HERC in this to be identified as will continue ny.” *10 However, dissenting opinion. the Official above-quoted paragraphs The Optional Redemption from the tled which advises the (includ- page face or cover of the prospective Official Statement price bondholder of the unmistakably inform even a casual ing premium) reader redemption of of some bonds that the Series 1986A Bonds do not consti- option at the of the with HERC’s give charge against (but or to a tute rise Henne- County’s option consent is limited to pin County’s general pow- taxing credit or its which does not exceed the Furthermore, obligation er. HERC’s money amount of deposit Redemp- on in the payment make is limited to its assets and Fund) tion or acting on against income. No recourse can be had request HERC’s to redeem all or of the (limited) general partners either its or other moneys deposited by bonds with to be Blount, Inc., against parent or of Trustee, options being HERC with the such general partner. HERC’s These severe limi- exercisable on October 1996 and thereaf- payment tations on sources of of the obli- section, ter. The next entitled Extraordi- gation clearly prospec- of the bonds inform a nary Optional Redemption, advises that that, tive investor without some as- further Facility damaged so that it cannot be payment, per- surance of the bonds issued to efficiently operated, the bonds could be re- operation mit the construction and of a mass option deemed at of the disposal facility burn solid unique waste by payment principal HERC and accrued unproven in the United States constitute a interest. The Statement warns that the Let- high risk investment. ter of Credit does not redemp- secure such a tion. The next six sections deal with manda- payment The further assurance of which (1) tory redemption: Mandatory Redemp- justifies Moody’s rating “Aaa” is found Proceeds, (2) tion Unused Mandatory provision for a Letter of Credit. The above- from Redemption in 36 Necessary Months To quoted paragraph prospective informs inves- If (3) Exemption, Preserve Tax Mandatory simultaneously tors that with the issuance of n ) Sinking Redemption, Fund Mandatory Lyonnais the 1986A Bonds Credit and Ban- Redemption upon Expiration Letter que Indosuez direct-pay will issue a Letter of (5) Credit Facility, or Alternate Credit Man- irrevocably binding Credit each of them datory Redemption upon Certain jointly Events Re- severally payment prin- Construction, lating Acceptance Opera- or cipal and accrued interest on the bonds when (6) tion Facility, and Mandatory due at Re- their various stated maturities or demption upon Condemnation acceleration the Facili- redemption. ty. The prospective Mandatory section entitled Re- unequivocally investor is then demption upon Expiration unambiguously Letter Cred- informed that unless it it or Alternate already Facility provides Credit has according terminated to its terms, follows: expires Letter Credit on Octo- 15,1992, ber and unless it has been extended days If 45 expiration before the stated date replaced by Facility an Alternate Credit of the extant Letter of Credit or Alter- “all outstanding Series 1986 Bonds will be Facility nate Credit Partnership or the subject mandatory redemption upon the Banks have not furnished to the Trustee termination of the Letter of Credit.” satisfactory evidence to it of the extension short, prospective investors were notified expiration date of the extant Letter safety that the net which assured bondhold- of Credit or the issuance of an Alternate security ers of the of their investment would Facility complying provi- with the expire on October 1992. At that time Indenture, sions of the all Outstanding either the bonds must be redeemed or some Series 1986A Bonds are to manda- action must safety be taken to furnish a new tory redemption on a occurring date
net. days prior less than expiration five to such Redemption date, of the bonds is redemption price discussed at at a equal to the length body some in the principal of the Official plus State- amount thereof interest ac- Following ment. a section entitled Notice crued to the date. The Letter Redemption is a section enti- expiration Credit has a stated date of Effect of *11 (See unconditional and that HERC lute and “ALTERNATE October FACILITY.”) except set-off that it has not assert a claim of CREDIT against repayments loan right to set off the put is prospective bondholder again the Once adjusted any fee or service fee due service expires on of Credit the Letter notice that on County, only if it payable from the but and 15,1992, the Trustee that unless and October security satisfactory to the has furnished satisfactory to it of received evidence has disputed. County the service fee is when the extant Letter either the extension specifies of interest 4.05 the amount Section of an Alternate Credit or the issuance Credit any delinquent on install- payable HERC days expiration the Facility before at least repayment. ment of loan date, Bonds are sub- of the Series 1986A all than mandatory redemption not later ject to option grants HERC the to Section 4.06 date. Then the days expiration the before County prepay require loan and the to the to the is directed of the Statement reader prices the bonds “at the times redeem FA- ALTERNATE CREDIT entitled section provided option- for and in the circumstances provides that expressly CILITY which 3.01(a) of the Inden- al Section Alternate of Credit or Letter Substitute requires 4.06 ture.” The balance Section Facility approved must be County give to written notice to the HERC Blount. HERC and as well as days prior to the Trustee at least 121 might in termi- result If the terms which prepayment is to be made and date on which prior to Octo- Letter of Credit nation of the pay period time to to the within the same 15,1992 prospective to a were of interest ber Redemption deposit in the Fund Trustee for bondholder, of the Letter of Credit the form to redeem all or such an amount sufficient of the bonds was issued on issuance to be outstanding bonds as HERC part of the Exhib- Statement as appended to the Official addition, 4.06 accords specifies. In Section informs Finally, Statement the Official C. right optional redemption that, request, on prospective bondholder [HERC],” only to “with the consent copies of the Loan County will furnish money Redemption is the extent there Indenture, and other docu- Agreement, the redemption pursuant available for Fund to in the Statement. ments referred (d) (e) 5.06 of the paragraph of Section provides at Sections County’s the exercise of the Indenture. That 1986A for issuance of the Series 2.01 and 2.02 consent option only to HERC’s is not Bonds, proceeds, disposition the bond only very option that the is available but equip- Project building and title to the by the circumstances is confirmed limited (see 3.09), agree- HERC’s ment also Section 4.06: succeeding sentence of Section Facility comple- operate on its ment moneys deposited and available Except for tion, repay loan in an amount and to (d) (e) paragraph of Section pursuant to bonds, together with pay sufficient mandatory and for 5.06 of the Indenture (if any) premium thereon.2 interest and time and redemption of Bonds at the Agreement is enti- IV of the Loan Article provided for in Section 3.01 circumstances AND DEPOSITS. LOAN PAYMENTS tled Indenture, 1986 Bonds shall Series County’s agreement 4.01 sets out the Section redemption by the for be called proceeds to HERC. Sec- the bond to lend Company of the only upon the direction obligation to with HERC’s tion 4.02 deals \i.e., HERC], required pay- describes repay the loan and PAY- LOAN Article IV is entitled Since Fund, Sinking the Bond ments to DEPOSITS, it not too sur- MENTS AND Fund, Fund, to the Re- Reserve section, following Section prising provides 4.03 demption Fund. Section 4.07, mandatory redemption: deals HERC, payments by additional certain redemption un- addition that HERC’s obli- provides 4.04 Section 3.01(c), 3.01(b), Section der Section agreement are abso- gations pursuant to the 73-page agree- loan description promises minder of the nature oversimplified 2. This Hennepin County and HERC. only repay a re- ment between is intended to lend and to *12 3.01(d) 3.01(f) Facility and Section of the Indenture nate complying Credit with the * * * the 1986 Bonds are Series to Section the Inden- 12.04 of of mandatory redemption, Company days prior expiry and the ture at least to the 4.5 loan, prepay shall the the date the Letter occurrence Credit or Alternate of of Facility any by Credit then held following of events: the Trustee. * * * * (Emphasis supplied.)
(a) Although Agreement the Loan does not (a) (e) through of Clauses Section 4.07 obligate County the to deliver to the Trustee which have been omitted from the above an extension or new Letter of or Credit other quotation precipi- all describe events which Facility, Agreement Alternate Credit the mandatory redemption. summary tate provide does that unless either or HERC the form, these clauses invoke re- issuing banks furnish an extension or new demption following for the reasons: Letter of or Credit other Alternate Credit (a) specified if certain conditions in Sec- Facility days prior at least 45 expira- to the tions 2.01 and 2.02 of the Service Credit, tion date of the current Letter of the Agreement County between the subject mandatory bonds are to redemption. HERC, securing govern- such as all dispute There is no that neither HERC nor permits necessary ment and licenses the Banks submitted such an instrument to provision by for construction and 1,1992. prior September the Trustee to But of HERC construction bonds and in- although the Loan does not re- required by agreement surance as the quire County replacement the to submit the prior are not satisfied to the Contin- safety expi- bondholder net to the Trustee on gency (January Termination Date ration of the of Letter at Section 6.13 1988 unless extended the consent agreement require, contrary does to the Credit); of the issuers of the Letter of plaintiffs’ allegation replace- that renewal or ment of the depended solely Letter of Credit (b) specified if the in conditions option banks, on issuing “not at 4.04(a) of the Indenture for disburse- option of County,” HERC or the ment of funds from the Construction equally contrary majority’s to the declaration Account have not been met option that “if an to renew the letter of credit Date; Contingency Termination * * * n exists, belongs to HERC and to the (c) County accepted has not the Banks, County,” not to the the event Project by February 1991 unless the the Banks offer to renew the Letter of Cred- date has County been extended it, both County agree and HERC must and HERC to the Service acceptance Moreover, the form offer. Agreement; or satisfactory renewal had to be to the (d) permanent in the event of shutdown of Trustee. Facility as the result of an act or If, contends, majority as the option omission on the of either HERC renew the “belongs Letter of Credit or the breach the Service Banks, HERC and County,” to the not to the Agreement; or position not in was a to frustrate (e) permanent in the event of shutdown of issuance of a renewal or new Letter of Cred- Facility a change result of a undisputed, however, it. It is that neither the law. HERC nor the Banks furnished to the Trust- ee an extension or renewal or substitute Let- precipitating event at issue this ter of Credit. (f) case is described at clause of Section 4.07 in these words: Now it is “option” indeed true that the (f)The Company or the Banks shall not offer to renew the Letter of Credit or not to have to the belongs Trustee extension offer to renew to the Banks. Nei- furnished expiry satisfactory date in to the ther nor any right HERC had form acceptance Trustee or require issuance and the Banks to extend or renew the
Substitute Letter Credit or other Alter- “option” Letter of Credit. But the Banks’ extend, undertaking. legal consideration for the Banks’ in the ble option to renew or not acquired by pay- places on sense; Although the Indenture the Trust- the Banks have right duty to demand to draw on the Letter of Credit of consideration ee the ment The Banks happening specified be renewed. one of several the Letter of Credit on the events, or decline to right party have the to offer simply Trustee is not a Credit; in order to renew the Letter offer and is not authorized to Letter *13 actual- Letter of Credit to for renewal of the accept an offer of a Letter of Credit on must offer to renew ly place, the Banks County. take HERC or the behalf of either accepted by both the must be and the offer implication that 12.04 As to the Section Agreement The Loan County and HERC. acceptance proffered of a Substi- mandates renewal, respect to Section provision with Credit, majority the fails to tute Letter of 6.13, straightforward: quite is provides 12.04 that the mention Section that the Banks offer to renew In the event accept the Substitute Letter Trustee shall Credit, acceptance the the Letter conditions, many only seven agreement of require the such offer shall depend upon opinion the of bond coun- which Company. County and the both the sel, all the Trustee’s satisfaction. are met to n n ‡ n n n short, majority’s import In view of the the plain lan- Having rejected out of hand the Agreement the Loan of Section 6.13 of requires the guage of 6.13 which Section has no basis in Section 12.04 of the Indenture County the and HERC agreement of both say, does the documents themselves. To as Let- acceptance of an offer to renew the for agreements” are majority, that the “bond the majority leaps to the re- ter of respect expi- ambiguous with to the effect of impos- 6.13 markable conclusion that Section deprive to ration of the Letter of Credit and obligation County and HERC the es on the County and HERC of their contractual of the renewed or “to ensure that the terms reject any renewal offer from the right to Letter of Credit are sufficient extended Agree- only not to rewrite the Loan Banks is investment.” protect the bondholders’ ment; impose it is also to on the but majority had In an earlier footnote “ obligation ‘to consider the and HERC the pro- of the Indenture as cited Section 12.04 interests, [their] and not bondholders’ best prevent mandato- viding that the Trustee can own,’ deciding whether to renew the when redemption by accepting a substitute Let- ry credit,” obligation which the same letter went on to state The footnote ter of Credit. imposed on the Coun- court of outline circum- proceeds 12.04 “Section majority says it ty obligation which —the the Trustee shall stances to which rejects. (Em- accept a Letter of Credit.” Substitute majority opinion.) phasis supplied appeals’ interpre- my court of view the at 8.09 of the of the declaration majority’s are intended to tation If the footnotes were Agreement that the bondholders cut off manda- Loan that the Trustee can indicate third-party of the covenants by accepting beneficiaries tory redemption a Substitute re- agreements in the HERC or of Credit to which either Letter consent, the bondhold- quire “to consider County or both refuse to interests, amounts and not its own” best disregards the element ers’ majority simply basic disregard primary obli- shocking is a to a A Letter of Credit of contract law. county obli- contract; gation commissioners —their requires making of a contract County. taxpayers of the gation to the by contract and the party one an offer Moreover, commissioners’ absent by party to even the other acceptance of that offer constituents, when duty the idea that to their contem- contract. The bond documents supposes each Banks, parties engage what agree which plate by the an offer transaction, party is re- one length upon following the arm’s funds when called provide and ad- his own interests quired to subvert acceptance of certain events occurrence party is to of the other County, vance the interests by that offer HERC and the commerce on their the law and stand both responsible payment of the sizea- parties respective Accordingly, mandatory redemption I am in full following heads. for the rea- rejec- majority’s expressed accord with the sons: appeals’ interpretation (b)
tion of court of proceeds If and to the extent the bond am, however, I Section 8.09. at a loss to expended have not been within 36 majority managed understand how the months of the date of issue unless the arrive at the same result. Trustee is Bond advised Counsel that failure to redeem does affect the Indenture, mortgage given form of exemption federal tax income of interest Inc., Company, to First Trust on the bonds. Trustee, form, description sets out a (c) In the event of condemnation of the maturities, rates, interest and numeration of Project. 1986 Bonds at Series Section 2.01A. Sec- (d) maturing The Series 1986A Bonds provides tion 2.01B in the event the *14 subject redemption begin- 2006 are to Initial Letter of Credit not is renewed and an ning in maturing 2002 and those in 2010 Facility Alternate Credit is not issued and subject redemption beginning are to in Trustee, accepted by “the shall par plus 2007 at accrued interest refund the Series 1986 Bonds which have application money in Sinking held redemption been called for in accordance Fund. 3.01(e) with the of Section hereof (e) (e) Clause follows verbatim: 4.07(f) Agreement.” and Section of the Loan subject The series 1986 Bonds are to Indenture, Article III of Redemption whole, mandatory redemption in but not Bonds, sets out the circumstances under part, interest, in par plus at accrued subject which the Series 1986 Bonds are to the occurrence of of the events redemption prior maturity, to the terms on (a), (b), (c), (d), specified paragraph in redeemed, which the bonds are to be and the (e) (f) or of Section 4.07 of the Loan Trustee, duties of the and HERC Agreement, upon the terms and condi- respect any redemption. with to Section prescribed tions in said Section 4.07 of 3.01, Bonds, Redemption pro- Series 1986 Agreement. the Loan vides as follows: (f) maturing The Series 1986A Bonds in subject The Series 1986 Bonds shall be to through subject 2001 are to manda- redemption prior maturity only to as fol- tory redemption, part, in on the next lows: payment days interest date at least 90 Clause [*] (a) of Section 3.01 n [*] n provides [*] that the [*] unexpended struction Account. after Completion funds remaining Date, in the Con- from the maturing Series 1986A Bonds after October (g) extraordinary optional Provides for re- 1,1996 subject are in whole or demption in the event of certain kinds of in option at the of the damage Facility. to or destruction of the if, that, HERC’s consent and to the extent sure, foregoing excerpts To be money Redemption available Fund discussion of the information disclosed (d) (e) paragraph or of Section 33-page Official Statement and the various 5.06 of option the Indenture or at the of the pertinent provisions 73-page County acting pur- at the request of HERC 133-page Indenture make option granted suant to HERC’s scintillating titillating reading. neither nor (a) Agreement. 4.06 of the Loan goes Clause do, however, excerpts The demonstrate that specify on to dates and the are, all three documents like others of their premium paid amount of to be on such re- kind, carefully well and drafted but interre- demption. exceedingly complex. lated and length Their (b) (f) through Clauses complexity may explain why of Section 3.01 set all—in out probability few, any, the various circumstances under which bondholders have — obvious, however, mandatory redemp- bonds are ever read them. It is from summary tion: In quoted form these clauses invoke a portions review of the of the Official Statement, permanent Agreement, and the shutdown as a result of the Loan prospective change bondholder is are not are Indenture that the law events which plain perfectly occur, times in apprised expected they four but are events whose language that the Letter of understandable provision occurrence has been foreseen and contemporaneously with issu- issued mandatory redemption made the event expire would of the Series 1986ABonds ance Although damage of occurrence. to or de- and that un- no later than October Facility may unfore- struction be both that Letter of Credit was extended or less beyond parties, seen and the control of the replaced by a Letter of Credit or some new precipitate mandatory redemption not does Facility the bonds would be Alternate Credit only extraordinary optional redemption. but par plus redeemed at accrued interest.3 mandatory redemption The other bases somewhat language of the documents varies specified are either scheduled to occur at a particular purpose docu- to meet they probably are within the time are is intend- ment: While the Official Statement parties. my control of one or more of the provide the information material to ed opinion specified which is event within decision whether to become a bond- reader’s parties control of or more of the to a one holder, Agreement spells out the the Loan hardly qualify an “unfore- transaction can County and HERC rights and duties of the happening.” parties seen Some of the se, governs and the Indenture inter prefer happen, that it not but that does *15 rights and duties of the Trustee and the merely make it unwelcome. unforeseen — majority op- County. The characterizes the provision respect expiration with to the redemption provision tional as “an allocation unique: expiration is of the Letter of Credit risk,” declaring that manda- of financial while during of the letter the life of the Series protection tory redemption is for the of the hardly 1986A Bonds can be characterized as “in the event of some unfore- bondholders repeatedly ad- unforeseen. Bondholders are happening jeopardize that would the seen terminated, vised that if not sooner the Let- pro- of the bonds.” That investment value 15, expire ter of Credit will on October 1992. First, wrong counts: nouncement is on two renewal, extension, expiration or Its without redemption nothing to do with optional has replacement either a substitute Letter of risk; allocation of financial there is no finan- Facility may or Alternate Credit or Optional redemption in redemption. cial risk may of either not be within the control only profitability to do with the of the has County. may It that in HERC or the be Second, there can be no doubt that bonds. 1992, apparent for reasons not when the mandatory redemption protects the bond- 1986, qualified in no bank bonds were issued on occurrence of an event that holders the no willing is to offer a Letter of Credit and jeopardizes the investment value of the Facility is available. Or Alternate Credit bonds —an event that alters the financial unac- may be that the terms of an offer are nothing any in absolutely there is risk —but HERC, ceptable County and or it to the invoca- of the bond documents that limits the HERC, simply that the or be either mandatory redemption un- tion of to “some own, reject any for reasons of its chooses to happening.” foreseen Of the various bases Agree- Nothing in either the Loan mandatory redemption, condemnation offer.4 for redemption, complain the only single exercise clause of the Inden- Inasmuch as (a) redemption optional clearly ture deals with stated contrac- or HERC of their —clause 3.01—while five clauses deal with of Section rights express con- breach of tual constitutes (f) (b) through mandatory redemption- implied covenant of tract a breach of an —clauses and/or 3.01, (e) of Section one of which—clause —incor- dealing. good faith and fair mandatory porates the bases for six additional redemption at 4.07 of the Loan set out all, necessity acceptance, if it occurs at 4. The for justification Agreement, me no for there seems to predictable peri and limited will occur within a majority’s assumption that a bondholder is interest rates od of time. Unless a decrease in utterly ignore description of the entitled to refunding justify the bonds coincided sufficient mandatory ten events which invoke rejection acceptance of the the time for or provision optional only for re- and to read demption and, Credit, acceptance a new Letter of banks’ offer of extraordinary optional redemption County and HERC into the exist- would lock the provisions by ignoring the for requires prescribed plus interest at rate ment or the Indenture justify identify principal. Except return or even to eventual HERO rejection. enough possible It is that the for increases the market value reason for safety security changes protect documents of the bond- the debt because investment, rates, by triggering security will sel holders’ man- interest debt just paid than datory redemption the documents do dom be worth more the lender * n * course, may, it. It become that. The financial risk has been allocated for Accordingly, typical which issued the Letter of worth much less. toto to the Banks Credit, security provides long-term that if in a for the Indenture investor debt primarily every Trustee has not received a new Letter of interested reasonable Facility accept- principal and interest Credit or Alternate Credit assurance * * * days prior paid able to the Trustee 45 will be when due. Short Letter, bankruptcy, security expiration date of the current the debt holder can nothing protect against ac Trustee must draw on the Letter of Credit do himself payment principal jeopardize tions the borrower which its funds sufficient * * n ability pay he and accrued interest. The Trustee and the the debt unless rights through performed Banks in accordance with their establishes his contractual agreement respective undertakings, set in the debt and on October forth days expiry indenture. before the date of the Letter of the Series 1986 Bonds were Nabisco, Metropolitan v. Ins. Co. RJR Life par plus redeemed at interest to October (S.D.N.Y.1989) Inc., F.Supp. concede, plaintiffs they 1992. As the deliv- court) (emphasis by Metropolitan added Life they ered their bonds for Foundation, (quoting American Bar Com paid accepted payment par were (1971)). Indentures, mentaries 1-2 on bonds, together value of their with interest to Metropolitan Life, generally In known as 9,1992. short, plaintiffs October have *16 case, the the bondholders com- MetLife investment, complete togeth- recovered their had, by plained entering that RJR Nabisco er with interest to the date. leveraged buy-out, into a undertaken an complaint they Their is not that lost all or jeopardized enormous new which debt its part principal even of their investment but ability drastically repay the bonds and only they profit that did not make as much as security impaired the for the bonds. Be- course, they hoped they had to make. Of purchased cause some of the bonds had been have had the use of the funds since October only 3 months before RJR Nabisco’s CEO 9, 1992 and have since invested them proposed leveraged buy-out, the it seems un- with sizeable success. likely by that the new debt was “unforeseen” following pur- The observation the United RJR Nabisco when those bonds were complaints States District Court for the Southern Dis- chased. The of the MetLife York, quoted by majority paralleled trict of in plaintiffs New the bondholders those of the support present Rejecting of their mistaken notion that in claim “the the case. their placement mandatory ambiguous structure and of the the bond documents were redemption provisions they suggest were not and that had violated an im- RJR Nabisco faith, voluntarily, plied good to be invoked but were intended covenant of the court had protection say language typical for the of the bondholders in this the about the bond documentation, put event of some unforeseen event that what the court called the “customary, boilerplate, provisions” value of the bondholders’ investment at risk” of de- through- is instructive: tailed indentures used and relied on security out the market: fact, significant [T]he which accounts in * * * protective provisions ‘[Bjoilerplate provisions the detailed are not typical long-term financing consequences relationship debt of the instrument, (the pur particular is that the lender borrowers and lenders and do security) expect particularized only depend upon chaser the debt can not inten- ing requirements expiration bond until new Letter of Credit.
511
prevent
incurring
that would
new debt to
parties to an indenture.
tions of the
adjudicative
relating
leveraged buy-out
facts
facilitate the
There are no
jury
implied
restricting
no
parties
litigation
[was]
to the
for a
“there
covenant
to the
meaning
boilerplate
might subject plaintiffs’ in-
action that
to find and
therefore,
is,
greater
non-payment.”
a matter of law vestment
risk of
provisions
Moreover, uniformity
n. 24.
fact.
Id. at 1519
rather than
interpretation
important
is
to the effi-
huge
No doubt the
increase RJR Nabis-
**
*
ciency
capital markets.
Where-
leveraged buy-
co’s debt attendant
capital
in the
market can
participants
gave
out
bondholders cause for
MetLife
adjust
according
affairs
to a uni-
their
safety
their concern about the
of their invest-
interpretation, whether it be cor-
form
ment. Not so for the Series 1986 bondhold-
proposition,
an initial
rect or not as
plaintiffs
ers who are the
here.
invest-
enduring
creation of
uncertainties as
plaintiffs
repaid in
ment of these
has been
meaning
boilerplate provisions
full,
9, 1992,
with interest
to October
when
all
would decrease the value of
deben-
place.
took
Had the Trustee
greatly impair
ture
the effi-
issues
timely
failed to draw
on the Letter of
* * *
capital
working
cient
markets.
jeopardizing
ability
such uncertainties would be created
Just
bonds, I
HERC to redeem the
have not the
interpretation
boilerplate provisions
plaintiffs
least doubt
would be before us
juries sitting
every
were submitted to
legitimate complaint
with a
—that
judicial
district
the nation.’
had
and HERC
breached their
Corp.
[Quoting Sharon Steel
v. Chase obligation to
than
redeem
bonds
less
Bank, N.A.,
Manhattan
691 F.2d
days
expiration
prior
of the Letter of
(2d
denied,
Cir.1982),
cert.
U.S. Credit.
513
case,
any
669,
unsophisticated
F.Supp.
(S.D.N.Y.1984),
In
even the most
vacated on
(2d
could
fail
procedural grounds,
investor
to understand that if
were and the here con- express contract, breach of an term of the cede that their bonds were redeemed implied dismiss claim of breach of cove- payment plus of their full face value accrued good nant of faith dealing, and fair which the short, interest. the bondholders did not plaintiffs they plead concede did not as a any money; they just profit lose did not separate claim. quite handsomely they hoped. as had Finally, I do not understand Minneso- In conclusion I obliged my am to reiterate recognized ta has ever cause action for Statement, observation that the Official implied breach of an good covenant of faith Agreement, typi- the Indenture are dealing independent underly- and fair of an cal bond documents —well crafted but ing party breach of contract If claim. lengthy extremely complex. Complex proves express breach of an term of the are, course, targets documents attractive contract, is, course, there no reason to complaints If, ambiguity. contrived question reach the whether there has been a however, the order in which the numbered Therefore, implied breach of an covenant. appear sections in the Loan appropriate say be more that breach the Indenture executed in connection with implied an only covenant is if actionable the issuance of the Series 1986 Bonds can be implied only covenant will aid and further ambiguity plain said to create an express terms of the contract and “will language provisions governing the Let- impose obligation never “whichwould be Redemption ter of Credit and —whether inconsistent with other terms the contrac- mandatory optional extraordinary op- ” relationship.’ Metropolitan tual Ins. Life ambiguous, tional —can be declared then all Nabisco, Inc., F.Supp. Co. v. RJR at ambiguous bond documents are subjective expectations any to whatever respect With to contracts like indentures— impress upon reader wishes to them. Like implied ... “[A]n covenant derives its sub- Appeals the United States Court of for the directly language stance from the Circuit, Second which sits at the heartland of Indenture, give and ‘cannot the holders of market, regard this I nation’s financial uni- any rights Debentures inconsistent with *19 formity interpretation application of and of those set out the Indenture.’ [Where] customary provisions of detailed docu- plaintiffs’ rights [have contractual throughout ments used and on relied violated, there can have been] been no opera- as securities market essential to the implied [Empha- breach covenant.” capital tion of markets. To treat of standard- original]. sis added language ambiguous in ized order (citing Id. at 1517 Gardner & Florence achieve a desired result seems to me com- Call Inc., Empire mercially, legally, Cowles Foundation v. as well as As unsound. PAGE, put (dissenting). it Appeals Justice Circuit Court of the Second Corp. Steel case— the Sharon join in the COYNE. I dissent of Justice capital market participants Whereas adjust according to a uni- their affairs
can it be correct interpretation, whether form proposition, initial the creation as an or not enduring as to the mean- of uncertainties boilerplate would de- ing of the value of all debenture issues crease impair working of greatly the efficient Minnesota, Respondent, STATE capital markets. v. at 1048. 691 F.2d TILDAHL, Appellant. Melvin Clifford the death knell I fear this decision sounds No. C6-95-1951. market, municipal bond for of the Minnesota Supreme Court of Minnesota. a to issue requires municipality either bonds, the terms of which will be unknown Dec. ambiguous judge how the until some decides interpreted will or to bond documents be callable choice which is
issue bonds at will—a pur- unlikely appeal either to issuers or depress- chasers and which well have ing on the value of such bonds. effect market majority re- wishes to characterize the the Letter
quirement offer to renew accepted of Credit be both provision equivalent as the of a and HERC “callable at making the Series 1986 Bonds opportunity accept fact the will.” In reject an offer renew the Letter a new could arise
or to issue Letter of Credit just only during period of time limited September whenever before 1992—from August Banks chose make an offer to course, know if the 1992. Of we do not offer, they made an but if had Banks accepted had HERC offer, neither nor HERC then triggered mandatory redemption could have ORDER proffered by rejecting a Letter of Credit files, pro- Based all records and expiry date the Letter of Credit until the herein, ceedings in 1992. issued peti- IT HEREBY that the IS ORDERED foregoing I For the reasons would reverse tion of Melvin Tildahl for Clifford further entry the court of and direct the Ap- review of the decision of the Court County Hennepin be, judgment in favor of the peals filed November Energy Hennepin is, Limited granted purpose Resource Co. for limited same Partnership. unpublished reversing the decision of the imposition appeals affirming
court of multiple jail and consecutive terms of- KEITH, (dissenting). Chief Justice aggravated driving violation and fenses *20 join open issue is I in the dissent of Justice COYNE. bottle violation. The whether Notes issued § issuance of its Term Loan the Trust 3 of the Reim- vides: in accordance with Section Agreement. bursement event that the Initial Letter of Credit is In the Facility accepts provides and an Alternate Credit is not renewed Section 12.04 that if Trustee accepted by at the not issued and the Trustee Credit there will be no a Substitute Letter of compliance Indenture, with the conditions time and in redemption. See Trust hereof, specified in Section 12.04 However, proceeds § 12.04 12.04. Section 1986 Bonds which have shall refund Series which the outline circumstances redemption with been called for in accordance accept a Letter of Credit. Trustee shall Substitute 3.01(e) provisions of Section hereof and Id. 4.07(f) Agreement by the Section of the Loan precluding any redemption, could result It is relevant to note a United States Dis- payment, premium importance even with a if the bonds trict Court’s view of the of such higher yield protective provisions: considered for had a than would be available the current bond significant fact [T]he which accounts market. We do not read 8.09 of Section protective provisions for the detailed Agreement broadly so hold typical long-term financing of the debt in- 8.09 of the Loan is strument, (the purchaser is that the lender bondholders, rights statement of the security) only expect of the debt can inter- beneficiaries, third-party to enforce the prescribed plus est at the rate the eventual provisions agreements. of the bond principle. Except possi- return of the ble increases in the market value of the question now turn We whether security changes debt because of in inter- agreement provisions the bond set forth rates, security est the debt will seldom be ambiguous respect above are with to defen paid worth more than the for it lender regarding mandatory redemp dants’ duties * * * course, may, It become worth tion of the bonds aas result of defendants’ Accordingly, typical much less. inves- thwarting renewal of the Letter of Credit. long-term security primar- tor in a debt The court of held that the bond ily every interested in reasonable assur- agreements ambiguous respect are principal ance that the and interest will be parties provide whether the intended to * * * paid bankrupt- when due. Short of trigger mandatory with discretion to cy, security nothing the debt holder can do option. of the bonds at its We protect against himself actions of the agree. provisions When the relevant in the jeopardize ability borrower which its whole, agreements bond are read as a consid * * * pay the debt unless he establishes ering placement redemp the relative rights through his contractual provisions, tion is unclear whether agreement set forth in the debt or inden- agreements permit bond to vol ture. untarily trigger mandatory redemption of the Nabisco, Metropolitan Ins. Co. v. RJR Life bonds. Inc., (S.D.N.Y.1989) F.Supp. altered) (emphasis (quoting American Bar 3.01(a) Specifically, Section of the Trust Foundation, 1- Commentaries on Indentures provides Indenture the bonds are re- (1971)). Thus, placement the structure and option