EPSTEIN
page 2 / 307 . OCR, unverified
emergence, or otherwise materially implicate the concerns identified in Chateaugay Ii.
Our conclusion is supported by the findings of the lower courts, which had intimate
familiarity with the Debtors' financial condition and the transactions that will arise from the
reorganization. Although it made no determinative ruling as to equitable mootness, the
bankruptcy court opined that "the risk of equitable mootness is not strong here for either
set of movants . . . the senior secured lender set of movants and the senior subordinated
noteholder movants." 15-1682 JA 4165 (emphasis added). The district court agreed. 15-
1682 JA 4837 ("I agree with Judge Drain that the risk of equitable mootness here is not
very great . . ."). Debtors' request that we dismiss these appeals as equitably moot is
denied.
VI
To summarize, we conclude as follows:
1. The Second-Lien Notes stand in priority to the Subordinated Notes.
r806) 2. The Senior-Lien Notes holders are not entitled to the make-whole premium.
3. The lower court erred in the process it used to calculate the interest rate applicable to the replacement notes
received by the Senior-Lien Notes holders. On remand, the bankruptcy court should assess whether an efficient market
rate can be r*391 ascertained, and. if so, apply it to the replacement notes.
4. We decline to dismiss any of these appeals as equitably moot.
For the foregoing reasons, we AFFIRM the District Court's order in part, with respect to the
priority of the Subordinated Notes and the Senior-Lien Notes holders' entitlement to a
make-whole premium; REVERSE the order in part, with respect to the method of
calculating the interest rate on the Senior-Lien Notes holders' replacement notes; and
REMAND the matter for further proceedings consistent with this opinion.
In re CIL, LTD., Debtor
18-cv-2226
UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK
2018 U.S. Dist. LEXIS 83452
May 4, 2018, Decided
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2018 U.S. Dist. LEXIS 83452, *
The Trustee% allegations in this proceeding are set forth in detail in Judge Garrity's opinion granting in part and denying in
part defendants' motion to dismiss the adversary proceeding. See id, OM. No. 100.
The Trustee alleges that, in the spring of 2013, CIL's sole asset was direct and indirect
ownership of 100% of the shares of CEVA Group, a holding company that controlled a
number of entities in the international freight management business. Id. ¶¶ 1, 36. CIL was
under the control of and owned almost entirely by the private equity firm Apollo Global
Management, LLC ("Apollo"). Id. ¶ 2. Gareth Turner and Mark Beith (the "Directors") were
CIL's directors and senior Apollo employees. Id. 1112, 23-24. On April 1, 2013, CIL
authorized CEVA Group to issue new shares to the newly created Apollo affiliate CEVA
Holdings LLC ("CEVA Holdings"). Id. ¶11108-09. Though [* 3] CIL held the same number
of shares before and after the restructuring, its ownership interest in CEVA Group was
reduced to 0.01%, while CEVA Holdings gained the remaining 99.9% interest. Id. The
newly issued shares were allegedly then used to equitize some of CEVA Group's debt,
including unsecured debt held by Apollo, such that Apollo itself ultimately owned 21% of
the recapitalized CEVA Group. Id. ¶ 112.
The Trustee alleges that this transaction stripped CIL of its only valuable asset without
consideration, id. ¶ 111, and that the restructuring was the product of the Directors' breach
of their fiduciary duties, aided and abetted by CEVA Group and CEVA Holdings. The
Trustee also alleges several claims for fraudulent transfers among the defendants
following the restructuring. Apollo is not a defendant in this adversary proceeding.
In August 2017, Michael McEvoy brought a-putative class action against Apollo and the
Directors (but not CIL or any CEVA entities) on behalf of CEVA Logistics managers who
held restricted shares of stock in CIL at the time of the restructuring. See Class Action
Complaint, McEvoy v. Apollo Global Mgmt., LLC, et al., No. 17-cv-891 (M.D. Fla. 2017),
ECF No. 1 ("Fl. N] Compl.") ¶ 13. McEvoy alleges that Apollo fraudulently induced class
members to purchase shares in CIL and that Apollo and the Directors owed a duty of care
to the employee investors that they breached in executing this restructuring.>
These allegations are described in greater detail in the bankruptcy courts Stay Order.
In October 2017, the Trustee filed a motion to enforce the bankruptcy's automatic stay and
enjoin the prosecution of the Florida class action, arguing that the claims in that case were
derivative and thus belonged to the estate and were subject to the automatic stay. Ch. 7