Bank has been sued by insurance giant Everlake in a dispute related to a $67m loan
US insurance firm Everlake Life Insurance – which is also one of the lenders – sued Bank of Ireland in early May, claiming the institution extended the maturity of date of loans made to a unit of Freedom Scientific despite Everlake’s objections.
Bank of Ireland was the sole lead arranger and sole bookrunner on the lending agreement made with Freedom US Acquisition Corporation in 2015.
Lenders agreed to extend a total of $67.5m, including $60m of term loans and $7.5m of revolving credit.
The money was being used by Freedom US Acquisition Corporation to complete the acquisition of a firm called Optelec.
Everlake has asked a New York court to annul the maturity extension agreement on the debt that it says was inked by Bank of Ireland last November.
But lawyers for Bank of Ireland and other lenders have insisted that Everlake’s action has no basis to proceed, under an amendment to the loan agreement.
“The sixth amendment provides that the lenders are not waiving or otherwise impairing any of their rights contained in the credit agreement, but only forbearing from exercising them for a limited time,” lawyers for Bank of Ireland and other lenders have told the court.
“The sixth amendment did not prioritise any lender’s loans over any other lender’s loans, or otherwise impair Everlake’s loan relative to other loans,” they add. “Nor, contrary to the complaint, was the maturity of Everlake’s loan extended beyond its maturity date.”
But Everlake has alleged that Bank of Ireland “wilfully proceeded” with the sixth amendment, “merely altering its proposed extension to a ‘forbearance’ in an attempt to obfuscate its breach of the credit agreement”.
Everlake has already asked the court to rule that the sixth amendment is null and void.
In seeking to have the action thrown out, the lawyers for Bank of Ireland have insisted that the disputed credit agreement prohibits any legal action being taken by an individual lender that is party to it.
“The credit agreement expressly forbids actions by an individual lender, so Everlake’s self-interested lawsuit fails as a matter of law,” the court has been told.
“Indeed, the New York Court of Appeals has held – on analogous facts – that an individual lender lacks standing to bring an individual action for breach of contract in response to a purported borrower default, ‘contrary to the will of the other 36 lenders to forbear from taking action’,” the lawyers have stated.
Everlake, which has assets under management of more than $23bn, holds just over $9m in principal amount of the outstanding term loans made to the Freedom division.
Other lenders involved include Siemens Financial Services, HSBC, Banc Alliance, the Teachers Insurance and Annuity Association of America, and Allstate.
Freedom Scientific owner Vispero told lenders last year that it was looking for a loan maturity extension so the business could be sold.