Examiner’s Report Supports Pastore’s Client’s Claims Involving a High-End Westchester Development

Pastore LLC represents a large creditor and owner of a construction management company in a bankruptcy matter in the Southern District of New York where a billionaire filed bankruptcy to avoid liability to his business partner, Pastore LLC’s client, concerning high-end developments in Westchester and Connecticut. Pastore LLC with co-counsel made a motion to have an examiner review the company’s finances. The examiner’s report indicated that he owes millions back to the bankruptcy estate.

Bankruptcy Court Holds the Plain Meaning of a Security Agreement Dictates

AMERINATIONAL COMMUNITY SERVICES, LLC V. AMBAC ASSURANCE CORP.: PUERTO RICO BANKRUPTCY COURT RULES THAT THE PLAIN LANGUAGE OF A SECURITY AGREEMENT DICTATES

A civil action was recently disputed in which Government Development Bank for Puerto Rico (“GDB”) sought to have the obligations owed to it prioritized over the bond agreements previously executed by the Puerto Rico Highway and Transportation Authority (“HTA”). The court in this case held that the “waterfall provisions” contained within the bond agreements were sufficiently specific to uphold the seniority of the bond obligations owed by HTA over the more recent obligations owed by the HTA to the GDB.

Puerto Rico (the “Commonwealth”), together with HTA began restructuring proceedings as a part of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”). At the time, HTA had roughly $4 billion in outstanding bond claims, and $2 billion in outstanding loan claims. HTA issued bonds in two parts and under bond resolutions dated 1968 and 1998. These resolutions stated that the bonds issued in 1968 had payment priority over the bonds issued in 1998, and any subsequent debt obligations undertaken by the HTA would be subordinated to both tranches of bonds.

Beginning in 2008, GDB entered into a series of intragovernmental agreements through which they loaned $2 billion to the HTA to continue their complete restructuring under PROMESA. These loans were evidenced by a series of loan agreements. Additionally, as a part of these transactions, GDB and the HTA executed an assignment and security agreement (collectively, the “Security Agreement”), pursuant to which HTA purported to assign certain excise taxes to GDB and granted a security interest in those taxes to secure GDB’s loan claims. These loan claims were later transferred to the GDB Debt Recovery Authority (“DRA”) as part of a consensual restructuring proceeding for GDB under Title VI of PROMESA. The Security Agreement was subject to Puerto Rico Acts 30 and 31 of 2012, which stated that taxed imposed must be used for the payment of principal and interest on any obligations or bonds of HTA.

In 2021, the Commonwealth filed an adjustment plan which provided that HTA bondholder’s payments were subordinate to the DRA’s payments. The collateral monitor and servicer for DRA debt filed a suit against the bondholders, stating that under Acts 30 and 31, the payments owed to them as HTA bondholders were subordinate to any payments owed to GDB under the GDB loans to the HTA.

The United States Bankruptcy Court (the “Court”) held that DRA’s claims did not subordinate HTA bonds, and the waterfall provisions dictated, despite Acts 30 and 31. The Court’s reasoning was that the Security Agreement “unambiguously prioritize[d] Bond payments by establishing a waterfall (or ‘turnover’) mechanism.” In making this observation, the Court further opined that “the plain text of the subordination provisions referred only to “outstanding bonds” issued under the bond resolutions, not to future bonds,” and thus, any debts or bonds incurred or issued subsequent to the 1968 and 1998 agreements was junior to those two initial encumbrances. The Court concluded with: “whatever distinctions may be evident or reasonably inferred in other contexts are precluded here by the plain language of the Security Agreement.”

In this case, having found that the contractual language of the 1968 and the 1998 agreements unambiguously and affirmatively subordinated DRA’s loans to all of the bonds issued by the HTA, the Court dismissed all the counts of DRA’s complaint that sought declaratory relief to prioritize their loans over HTA’s bond obligations.

Id. at *6.
Id. Puerto Rico Oversight, Management, and Economic Stability Act, Pub. L. No. 114-187 (2016).
What’s in a Name? Court Holds that Despite it’s Title, a Security Agreement Also Subordinated Junior Creditor’s Rights to Payment, Cadwalader, Wickersham & Taft LLP (Dec. 1, 2021) https://www.jdsupra.com/legalnews/what-s-in-a-name-court-holds-that-2869667/.
AmeriNational Community Services, LLC v. Ambac Assurance Corp. (in re Fin. Oversight & Mgmt Bd. For P.R.), Adv. Proc. No. 21-00068-LTS, 2021 WL 5121892, at *2 (Bankr. P.R. Oct. 29, 2021).
Id. at *2.
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Id.
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Id. at *9.
Id.
Id. at *10.
Id. at *8.

Pastore Argues Against White & Case in $650MM Financial Services Case Before Third Circuit

Arising from a $650 Million financing dispute, Pastore LLC, representing a large national investment bank, argued at the Third Circuit on September 29th. The argument was in person in Philadelphia. Pastore LLC has brought a FINRA arbitration to collect the investment banking fee. White & Case had sought to enjoin the securities arbitration in the DE Bankruptcy Court. Pastore LLC’s clients prevailed, and the DE case was dismissed. White & Case’s client appealed to the Third Circuit, arguing that the DE Bankruptcy Court had jurisdiction to hear the case.

Pastore Argues Against White & Case in $650MM Financial Services Case Before Third Circuit

Arising from a $650 Million financing dispute, Pastore LLC, representing a large national investment bank, argued at the Third Circuit on September 29th. The argument was in person in Philadelphia. Pastore LLC has brought a FINRA arbitration to collect the investment banking fee. White & Case had sought to enjoin the securities arbitration in the DE Bankruptcy Court. Pastore LLC’s clients prevailed, and the DE case was dismissed. White & Case’s client appealed to the Third Circuit, arguing that the DE Bankruptcy Court had jurisdiction to hear the case.

Pastore LLC Counsel in Large Bankruptcy Case Involving High End Westchester Development

Pastore LLC has been tapped as counsel in two related bankruptcy matters in the Southern District of New York (presided over by Judge Drain, who is also presiding over the Purdue Pharma Bankruptcy). The first matter involved a residential development in Bronxville, New York that is the most expensive per square foot development in Westchester. The second matter involves the related construction management company. Pastore LLC represents a large creditor and owner of the construction management company.