Related documents:
Bondholder Brief
Defendant Brief
Incora 2024/2026 minority bondholders have filed a brief in support of their tortious interference claims over the 2022 uptiering transaction, with the defendants, including BlackRock and J.P. Morgan, asserting the economic interest defense in their brief. Despite the favorable oral ruling by Judge Marvin Isgur for the 2026 bondholders on the breach of contract issue, the minority 2024/2026 noteholders continue to pursue claims of tortious interference.
Represented by Kobre & Kim, the 2024/2026 noteholders argue that the defendants were aware that the 2022 transaction would harm the 2026 holders. The brief asserts: “The Interferers also knew that the 2022 Transaction would harm the 2026 Holders: in fact, that was the premise of PIMCO’s and Silver Point’s investment thesis. They admitted to acting in their own economic self-interests by trying to capture a 64% internal rate of return (as calculated by PIMCO) that would only be possible by taking a constitutionally protected property interest from excluded holders.”
In response, BlackRock and J.P. Morgan and the other defendants, represented by Brian Heidlage of Holwell Shuster, have filed their own supplemental brief, challenging the tortious interference claims. The defendants argue that the minority noteholders fail to meet the necessary legal elements for such a claim. “For one, the Court ruled that there was no breach of the 2024 Indenture, and a breach of contract is a necessary element of any tortious interference with contract claim. The Court also ruled that the lien release was not effective as to the 2026 Holders. Accordingly, their contractual rights were not impaired and the Counterclaim Defendants did not cause them any harm,” according to the brief.
Additionally, the defendants assert an economic interest defense, arguing that their substantial stakes in Incora justified their actions. The brief draws on a recent decision in the Robertshaw bankruptcy case, which upheld the economic interest defense in the context of a liability management transaction. Brian Heidlage, in his brief, notes that in “the only three New York cases dealing with liability management transactions, New York courts have dismissed tortious interference claims against defendants who provided financing to the alleged breaching party in need of liquidity.”
Judge Marvin Isgur of the Southern District of Texas determined in an oral bench held on June 10 that Incora’s 2022 uptiering transaction is not effective, as it breached the terms of the 2026 note indentures. Judge Isgur therefore stopped short of altering the prepetition capital structure since the uptiering deal was not effective in stripping liens. The ruling voids the transaction as to the 2026 notes only, as the court finds that there was no breach to the 2024 indenture.
Jennifer Lappe, J.D.
jennifer.lappe@levfininsights.com
+1 246 256 1345
