District Court Denies Distressed Funds the Right to Vote on Bankruptcy Plan

The US District Court for the Western District of Washington (the "District Court") recently affirmed a bankruptcy court decision that prohibited a transferee of a secured lender's interest in a loan from voting on a debtor's plan of reorganization on the grounds that such transferee, a distressed debt investor, was not an Eligible Assignee under the applicable loan agreement. Meridian Sunrise Village, LLC v. NB Distressed Debt Investment Fund Ltd., et al., No. 13-5503 (W.D. Wash. March 6, 2014) (In re Meridian Sunrise Village, LLC).

Background -

In 2008, Meridian Sunrise Village, LLC (Meridian) borrowed $75 million from U.S. Bank (the "Agent") to finance the construction of a shopping center. The Agent syndicated the loan, assigning portions to Bank of America, Citizens Business Bank, and Guaranty Bank and Trust Company (each a "Lender" and, collectively with the Agent, the "Lender Group"). Section 13.2 of the loan agreement among the parties (the "Loan Agreement") included the following limitation on subsequent transfers...

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Topics:  Assignees, Commercial Bankruptcy, Debt, Loan Agreements, Secured Lenders

Published In: Bankruptcy Updates, Civil Procedure Updates, Civil Remedies Updates, Finance & Banking Updates, Commercial Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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