legal notes

Highland Capital Management, L.P. v. UBS Securities, LLC (In re Lyondell Chemical Company, et al.), --- B.R. ----, 2013 WL 1450501 (Bankr. S.D.N. Y. April 10, 2013) (Bankruptcy court dismisses a potential lender’s complaints against the agent of a syndicated facility for tortious interference with contract and business relations after the agent excluded the lender from the facility.)

This case stems from the emergence of Lyondell Chemical Company and its affiliates from Chapter 11 in 2010. The $3.25 billion financing that fueled its exit from bankruptcy included a $1 billion term loan arranged by UBS Securities, LLC. Highland Capital Management, L.P. was one of a number of potential lenders who were interested in participating in the facility. Highland committed $150 million to the term loan, but UBS declined to include Highland in the final lender group.

At the time UBS declined to include Highland in the final lender group, UBS and Highland were engaged in litigation on an unrelated matter. Noting the pendency of this litigation, Highland alleged that UBS’ decision to exclude it from participating in the credit facility was motivated by a desire to “embarrass Highland and diminish its standing in the financial community…” Highland Capital, 2013 WL 1450501 at 3. As such, Highland sued UBS for tortious interference with Highland’s opportunity to participate in the Lyondell credit facility.

UBS moved for summary judgment and, for the reasons discussed below, the bankruptcy court dismissed all of Highland’s complaints on summary judgment and held that UBS had the right to elect not to do business with Highland, regardless of UBS’s motivation.

Highland’s suit contained two com-
plaints. First, Highland alleged that UBS’
actions constituted tortious interference
with an existing contract. The informa-
tion memorandum circulated to potential
lenders outlined material terms of the
proposed facility and included a form of
commitment letter for each interested
lender to return to Lyondell. Highland,
a long-time lender to, and investor in,
Lyondell, issued a commitment letter in
the form required, which read “[s]ubject
only to satisfactory documentation, we
are pleased to commit: $150 million to
the $1.0 billion Senior Secured Term Loan
Facility.” Id at 2. A few weeks later,
Lyondell provided notice of revised pric-
ing terms and requested that Highland
“recommit” to the revised facility. High-
land replied confirming its commitment
“as previously agreed.” However, when
the term loan facility was ultimately
consummated, Highland was excluded
from the pool of participating lenders.

Id. at 12. UBS asserted two defenses of absolute privilege to this claim. According to the court, the first defense, which deals with free action in the defendant’s economic interest, required factual evidence beyond the scope of the procedural dismissal at issue. However, the court agreed with UBS’ second defense, which rested on an absolute privilege to choose with whom it will do business. With respect to this defense, motivations (including malice) are irrelevant. The court held that UBS was simply privileged to refuse to deal with Highland, regardless of the reasons for its refusal.

This case presents an interesting judicial review of the relationship between the agent and lenders during the syndication process. Determination of whether a contract exists as a result of the circulation of offering material and the return of signed commitment papers will largely depend on the language in the documents. However, the court’s ruling that an agent has the right to elect not to do business with any particular lender, and ultimately to exclude that lender from the facility, is noteworthy. TSL