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
Jonathan N. Helfat, partner, Otterbourg
Steindler Houston & Rosen, PC, and
Richard M. Kohn, partner, Goldberg
Kohn, are CFA co-general counsel.