Reorganization plan would wipe out equity holders stake. Disclosures hint of cause for actions against company’s parents, affiliates, officers, managers, directors, and professional advisers.
The Creditors’ Committee contends that the 2006 Duke Transaction rendered Crescent Holdings and certain of its subsidiaries insolvent and that the transaction also represented a breach of duty by its parents, affiliates, officers, managers, directors, and professional advisers, and that as a result, estate causes of action may exist that arise out of this transaction against participants in the transaction, approving directors or managers and recipients of the proceeds thereof. The Debtors have not analyzed and express no opinion whether such claims relating to the 2006 Duke Transaction are meritorious; however, the Creditors’ Committee believes that such causes of action arising from the 2006 Duke Transaction may include and be based on theories including, without limitation:
- State law claims of fraudulent transfer
- State law claims of fraudulent conveyance
- State law claims of actual and/or constructive fraud
- Breach of fiduciary duties and obligations
- Claims for rescission and return of the proceeds distributed to Duke and its affiliates
- State law claims for civil conspiracy and aiding and abetting fraud
- State law claims for negligence
- State law claims for unlawful payment of dividends
2006 Duke TransactionIn the months immediately prior to September 2006, Duke Ventures, LLC (“Duke”), a Nevada limited liability company, was the sole owner of Crescent Resources. Duke, in turn, was a wholly-owned direct or indirect subsidiary of Duke Capital, LLC. On September 7, 2006, a Formation and Sale Agreement was entered into between Duke, Crescent Resources and several Morgan Stanley real estate investment entities whereby the Parties agreed that: (a) Crescent Resources had, pre-transaction, an enterprise value of $2.075 billion; (b) Duke would form Crescent Holdings and contribute its equity interest in Crescent Resources to Crescent Holdings; (c) Crescent Resources would enter into the 2006 Credit Agreement (defined below) from which $1,187,000,000 in term loan proceeds would be distributed to Crescent Holdings, with Crescent Holdings then distributing such proceeds directly (and solely) to Duke; (d) Morgan Stanley Real Estate Fund would purchase 49% of the membership interests in Crescent Holdings from Duke for $414 million; and (e) Crescent Holdings would enter into an employment agreement with Arthur W. Fields which provided, among other things, for the issuance to Mr. Fields of 2% of the membership interests in Crescent Holdings.Contemporaneous with the foregoing transaction, Crescent Holdings and certain of its subsidiaries entered into that certain Credit Agreement (the “2006 Credit Agreement”) among Bank of America, N.A. as administrative agent and collateral agent, the lenders party thereto from time to time as lenders, Crescent Resources as the borrower and Crescent Holdings and certain of its subsidiaries as guarantors, whereby Crescent Resources received: (a) $1.225 billion in term loan proceeds; (b) a $200 million unfunded revolving credit commitment; and (c) a letter of credit sub facility commitment not to exceed $100 million. Of the proceeds of the $1,225,000,000 in term loans, $1,187,000,000 were distributed to Duke as described in the foregoing paragraph with such proceeds being ultimately distributed to its parent, Duke Capital, LLC.As a continuation of the 2006 Duke Transaction, liens were granted to the Prepetition Lenders on depository accounts in 2007 and mortgages on real property of Crescent Resources and certain subsidiaries were created in 2008.The 2006 Duke Transaction, comprised of the Formation and Sale Agreement, the related financing transaction evidenced by the 2006 Credit Agreement, and the distribution of the loan proceeds to Duke, was approved by the then serving managers and directors of Crescent Resources, Crescent Holdings, Duke and Duke Capital, LLC and the various approval committees then appointed under the applicable corporate or limited liability company documentation for such entities.
Currently, LandMar Group, LLC, LandMar Management, LLC, The Reserve, LLC, Roberts Road, LLC, and Grand Woods Developers, LLC are negotiating a settlement agreement with Florida Landmark Communities, Inc. to convey the assets to the secured parties in satisfaction of the claims related to the loans and related documents described in subsections (a) through (c) above. The Debtors intend to stipulate that all assets will be conveyed to the secured parties subject to all outstanding ad valorem tax obligations.