Audax Credit Opportunities offshore Ltd. v. TMK Hawk Parent, Corp.

2021 NY Slip Op 50794(U)

Audax Credit Opportunities Offshore Ltd., AUDAX CREDIT OPPORTUNITIES (SBA), LLC, AUDAX CREDIT BDC INC., AUDAX SENIOR LOAN INSURANCE FUND SPV, LLC, AUDAX SENIOR LOAN FUND III SPV, LLC, AUDAX SENIOR LOAN FUND III (OFFSHORE) SPV, LTD., KOCAA/AUDAX PRIVATE DEBT FUND, LP, AUDAX SENIOR DEBT (AZ) SPV, LLC, AUDAX SENIOR DEBT (MP) SPV, LLC, AUDAX SENIOR LOAN FUND I (OFFSHORE) SPV, LTD., AUDAX SENIOR LOAN FUND (ST) SPV, LLC, AUDAX SENIOR LOAN FUND I (OFFSHORE) SPV II, LTD., BLUEMOUNTAIN CLO 2012-2 LTD, BLUEMOUNTAIN CLO 2013-1 LTD, BLUEMOUNTAIN 2013-2 LTD, BLUEMOUNTAIN CLO 2015-2 LTD, BLUEMOUNTAIN CLO 2015-4 LTD, BLUEMOUNTAIN CLO 2016-1 LTD, BLUEMOUNTAIN CLO 2016-2 LTD, BLUEMOUNTAIN CLO 2018-2 LTD, BLUEMOUNTAIN CLO 2018-3 LTD, BLUEMOUNTAIN CLO XXII LTD, BLUEMOUNTAIN FUJI U.S. CLO II LTD, BLUEMOUNTAIN FUJI U.S. CLO III LTD, GOLUB CAPITAL PARTNERS CLO 19(B)-R, LTD., GOLUB CAPITAL PARTNERS CLO 22(B)-R, LTD., GOLUB CAPITAL PARTNERS CLO 23(B)-R, LTD., GOLUB CAPITAL PARTNERS CLO 26(B)-R, LTD., GOLUB CAPITAL PARTNERS CLO 35(B), LTD., GOLUB CAPITAL PARTNERS CLO 37(B), LTD., GOLUB CAPITAL PARTNERS CLO 39(B), LTD., GOLUB CAPITAL PARTNERS CLO 40(B), LTD., ICG U.S. CLO 2014-1, LTD., ICG U.S. CLO 2014-2, LTD., ICG U.S. CLO 2014-3, LTD., ICG U.S. CLO 2015-2R, LTD., ICG U.S. CLO 2016-1, LTD., ICG U.S. CLO 2017-1, LTD., ICG U.S. CLO 2017-2, LTD., ICG U.S. CLO 2018-1, LTD., ICG U.S. CLO 2018-2, LTD., ICG U.S. CLO 2013-3, LTD., NEW MOUNTAIN FINANCE DB, L.L.C., NEW MOUNTAIN FINANCE HOLDINGS, L.L.C., NEW MOUNTAIN GUARDIAN III SPV, L.L.C., ROMARK CLO-I LTD., ROMARK CLO-II LTD., ROMARK WM-R LTD., BROOKSIDE MILL CLO LTD., JEFFERSON MILL CLO LTD., JACKSON MILL CLO LTD., ADAMS MILL CLO LTD., SUDBURY MILL CLO LTD., YORK CLO-1 LTD., YORK CLO-2 LTD., YORK CLO-3 LTD., YORK CLO-4 LTD., YORK CLO-5 LTD., YORK CLO-6 LTD., Z CAPITAL CREDIT PARTNERS CLO 2018-1 LTD., Z CAPITAL CREDIT PARTNERS CLO 2019-1 LTD., Plaintiffs, v. TMK Hawk Parent, Corp., CENTERBRIDGE PARTNERS, L.P., BLACKSTONE TACTICAL OPPORTUNITIES FUND L.P., OAKTREE STAR INVESTMENT FUND II, L.P., SEVENTH STREET HOLDINGS 1, L.P., SEVENTH STREET HOLDINGS 2, L.P., SEVENTH STREET HOLDINGS 3, L.P., SEVENTH STREET HOLDINGS 4, L.P., SEVENTH STREET HOLDINGS 5, L.P., SEVENTH STREET HOLDINGS 6, L.P., SEVENTH STREET HOLDINGS 7, L.P., SEVENTH STREET HOLDINGS 8, L.P., SEVENTH STREET HOLDINGS 9, L.P., SEVENTH STREET HOLDINGS 10, L.P., SEVENTH STREET HOLDINGS 11, L.P., SEVENTH STREET HOLDINGS 12, L.P., SEVENTH STREET HOLDINGS 13, L.P., SEVENTH STREET HOLDINGS 14, L.P., OAKTREE HUNTINGTON INVESTMENT FUND II, L.P., ASOF HOLDINGS I L.P., ARES INSTITUTIONAL LOAN FUND, L.P., ARES XXVII CLO LTD., ARES XXVIIIR CLO LTD., ARES XXIX CLO LTD., ARES XXXIR CLO LTD., ARES XXXIIR CLO LTD., ARES XXIV CLO LTD., ARES XXXVR CLO LTD., ARES XXXVII CLO LTD., ARES XXXVIII CLO LTD., ARES XXXIX CLO LTD., ARES XL CLO LTD., ARES XLI CLO LTD., ARES XLII CLO LTD., ARES XLIII CLO LTD., ARES XLIV CLO LTD., ARES XLV CLO LTD., ARES XLVI CLO LTD., ARES XLVII CLO LTD., ARES XLVIII CLO LTD., ARES XLIX CLO LTD., ARES L CLO LTD., ARES LI CLO LTD., ARES LII CLO LTD., ARES LIII CLO LTD., ARES LIV CLO LTD., DENALI CAPITAL CLO X LTD., ARES SENIOR LOAN TRUST, FUTURE FUND BOARD OF GUARDIANS ON BEHALF OF FUTURE FUND AND MEDICAL RESEARCH FUTURE FUND, TRANSATLANTIC REINSURANCE COMPANY, RSUI INDEMNITY COMPANY, INC., CIBC ASSET MANAGEMENT INC. AS TRUSTEE OF RENAISSANCE FLOATING RATE INCOME FUND, STICHTING PENSIOENFONDS HOOGOVENS, ARES INSTITUTIONAL CREDIT FUND LP, SEI INVESTMENTS MANAGEMENT CORPORATION ON BEHALF OF SEI INSTITUTIONAL INVESTMENTS TRUST, BOWMAN PARK CLO, LTD., BRISTOL PARK CLO, LTD., BURNHAM PARK CLO, LTD., BUTTERMILK PARK CLO, LTD., CATSKILL PARK CLO, LTD., CHENANGO PARK CLO, LTD., COLE PARK CLO LIMITED, CUMBERLAND PARK CLO, LTD., DEWOLF PARK CLO, LTD., DORCHESTER PARK CLO DESIGNATED ACTIVITY COMPANY, GILBERT PARK CLO, LTD., GRIPPEN PARK CLO, LTD., JAY PARK CLO, LTD., LONG POINT PARK CLO, LTD., SENECA PARK CLO, LTD., STEWART PARK CLO, LTD., TACONIC PARK CLO, LTD., THACHER PARK CLO, LTD., THAYER PARK CLO, LTD., TREMAN PARK CLO, LTD., WEBSTER PARK CLO, LTD., WESTCOTT PARK CLO, LTD., SCOTTISH WIDOWS PENSION TRUSTEES LIMITED AS TRUSTEE OF SCOTTISH WIDOWS RETIREMENT BENEFITS SCHEME, OZLM XVII, LTD., OZLM FUNDING, LTD., OZLM FUNDING IV, LTD., OZLM XIX, LTD., OZLM XI, LTD., OZLM XXI, LTD., OZLM XXII, LTD., OZLM XVI, LTD., OZLM FUNDING II, LTD., OZLM FUNDING III, LTD., OZLM VI, LTD., OZLM VII, LTD., OZLM VIII, LTD., OZLM IX, LTD., OZLM XII, LTD., OZLM XIII, LTD., OZLM XV, LTD., OZLM XVIII, LTD., OZLM XX, LTD., OZLM XIV, LTD., ABR REINSURANCE LTD., CHUBB EUROPEAN GROUP SE, ACE PROPERTY & CASUALTY INSURANCE COMPANY, J.P. MORGAN BANK (IRELAND) PUBLIC LIMITED COMPANY ON BEHALF OF BLACKROCK BANK LOAN FUND, BLACKROCK ADVISORS, LLC ON BEHALF OF BLACKROCK FLOATING RATE INCOME TRUST, BLACKROCK LIMITED DURATION INCOME TRUST, BLACKROCK CREDIT STRATEGIES FUND, BLACKROCK FUNDS II, AND BLACKROCK FUNDS V, BLACKROCK MULTI-STRATEGY CREDIT FUND LTD., COMMISSION DE LA CONSTRUCTION DU QUEBEC, CORPORATION DES MAITRES ELECTRICIENS DU QUEBEC ON BEHALF OF FONDS DE FORMATION DES SALARIES DE L'INDUSTRIE DE LA CONSTRUCTION DU QUEBEC, BLACKROCK DEBT STRATEGIES FUND, INC., BLACKROCK FLOATING RATE INCOME STRATEGIES FUND, INC., BLACKROCK FUND MANAGEMENT COMPANY S.A. ON BEHALF OF BLACKROCK GLOBAL INVESTMENT SERIES, LOAN FUNDING II, LLC, MAGNETITE XII, LTD., MAGNETITE XIV-R, LIMITED, MAGNETITE XV, LIMITED, MAGNETITE XVI, LIMITED, MAGNETITE XVII, LIMITED, MAGNETITE XVIII, LIMITED, MAGNETITE XIX, LIMITED, MAGNETITE XX, LIMITED, MAGNETITE XXI, LIMITED, MAGNETITE XXII, LIMITED, MAGNETITE VII, LIMITED, MAGNETITE VIII, LIMITED, BLACKROCK MULTI-STRATEGY CREDIT MASTER FUND LTD., CAAPS TRUSTEE LIMITED AS TRUSTEE OF CIVIL AVIATION AUTHORITY PENSION SCHEME, NC GARNET FUND, L.P., FIXED INCOME OPPORTUNITIES NERO, LLC, BLACKROCK SENIOR FLOATING RATE PORTFOLIO, Defendants.

Supreme Court, New York County

August 16, 2021

Unpublished Opinion

Counsel for Plaintiffs:

Jennifer Selendy Faith Gay Andrew R. Dunlap Ryan W. Allison

SELENDY & GAY PLLC

Counsel for Defendant TMK Hawk Parent, Corp.

Richard I. Werder Jonathan B. Oblak Julia Beskin Victor Noskov Anna Deknatel Zachary Russell

QUINN EMANUEL URQUHART & SULLIVAN, LLP

Counsel to Defendants listed in Complaint Schedule 2 as the Oaktree Lenders, Ares Lenders, Sculptor Lenders, and BlackRock Lenders:

Theodore N. Mirvis

Ben M. Germana

Emil A. Kleinhaus

Stephen D. Levandoski

WACHTELL, LIPTON, ROSEN & KATZ

Counsel to Defendants listed in Complaint Schedule 2 as the Blackstone Lenders:

Danielle L. Rose Adam M. Lavine

KOBRE & KIM LLP

Counsel for Defendant Centerbridge Partners, L.P.:

Kenneth H. Eckstein

Michael J. Dell

Chase Mechanick

KRAMER LEVIN NAFTALIS & FRANKEL LLP

Counsel to Blackstone Tactical Opportunities Fund L.P:

Erica S. Weisgerber

DEBEVOISE & PLIMPTON LLP

JOEL M. COHEN, J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 002) 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 19, 61, 62, 63, 64, 65, 66, 67, 68, 93, 94, 96, 97, 98, 99, 137 were read on this motion to DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 003) 35, 36, 37, 69, 70, 71, 72, 73, 74, 75, 76, 95, 138 were read on this motion to DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 004) 38, 39, 40, 41, 42, 43, 77, 78, 79, 80, 81, 82, 83, 84, 101, 139 were read on this motion to DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 005) 44, 45, 46, 47, 85, 86, 87, 88, 89, 90, 91, 92, 100, 140 were read on this motion to DISMISS.

A syndicated loan is a loan extended by a group of lenders (i.e., a syndicate) to a single borrower, typically under a single agreement with common terms. By pooling their resources, the lenders share the benefits and risks of the transaction. Generally speaking, the spirit of such arrangements among lenders is all for one, one for all. But not always.

This dispute arises from the amendment of a syndicated credit agreement that left one group of First Lien lenders (Plaintiffs) subordinated, without their consent, to the interests of another group of First Lien lenders (the Lender Defendants). ^[1] The Lender Defendants purportedly worked with the Borrower Defendant (TriMark), in a carefully-crafted multi-step process, to swap their First Lien loans for a new category of "super senior" debt that is to be repaid in full before Plaintiffs' nominally "first" priority loans are repaid at all. According to Plaintiffs, the Defendants sought to insulate their maneuver from scrutiny by amending the credit agreement to make it "extraordinarily difficult," if not impossible, for Plaintiffs to challenge the transaction in court.

The results, as alleged by Plaintiffs, were stark and unevenly distributed. On the positive side, the transaction injected $120 million in fresh liquidity for TriMark, a restaurant-supply business struggling in the throes of the COVID-19 pandemic. It also benefited TriMark's Equity Sponsors, Defendants Centerbridge and Blackstone, who had a financial interest in TriMark receiving additional funding. And of course, it benefited the Lender Defendants, who secured a place at the front of the repayment line, albeit at the cost of extending additional credit to a troubled borrower. Plaintiffs, on the other hand, were left with loans that likely would be worthless in the event of a default. The transaction purportedly caused the rating and market value of Plaintiffs' loans to plummet.

In this action, Plaintiffs denounce Defendants' conduct as a "cannibalistic assault," "lender-on-lender violence," and outright "theft." They seek a declaratory judgment that the amended credit agreement crafted by the Lender and Borrower Defendants is void. They also assert...