Axos Financial and Siemens Financial Services have brought litigation in the New York State Supreme Court to challenge a dropdown and double dip transaction that, they argue, violates sacred rights provisions of the credit agreement designed to protect them against these types of transactions. They are also seeking to avoid the transactions under the New York Uniform Voidable Transactions Act on the grounds that they were intended to hinder the recovery of the so-called “excluded lenders” in any future bankruptcy case. The defendants, on the other hand, not only defend the transactions as being permitted under the credit agreement, but also contend that, regardless of whether they were permitted under the agreement, Axos and Siemens lack standing to pursue their complaint due to the credit agreement’s “no action” clause.

As further discussed below, the borrower and required lenders amended the credit agreement to add protections that gave lenders additional sacred rights in exchange for giving the borrower a finite holiday from certain financial covenants. The borrower and a lender group then proceeded to amend the credit agreement again, stripping most of the protections included in the prior amendment, and engaged in the dropdown transaction that the plaintiffs now challenge.

In this article, the Debtwire legal analyst team breaks down the transactions and discusses the most significant legal arguments, including the threshold issue of whether the no action clause will stop the plaintiffs before they can even get started. A ruling on this point will further develop caselaw from the J. Crew decision (issued by a New York State Court) holding that a no action clause barred litigation under a comparable scenario. If the plaintiffs make it past the no action clause, many of the remaining arguments are novel, including whether several related transactions can be collapsed into a single transaction, and whether the initial paydown of the participating lenders’ loans constituted a “discounted buyback.” Although a New York court has already ruled in Mitel that contract provisions must be precisely worded and enforced, it would seem that the plaintiffs here would have a compelling argument that this was not a discounted buyback (for the reasons discussed below) to survive a motion to dismiss.

Acquisition finance and adverse amendments

According to the amended complaint, STG, a national provider of containerized logistics services, was formed in March 2022 through a leveraged buyout, whereby private equity firm Wind Point Partners merged one of its portfolio companies with a business segment of XPO Logistics, one of North America’s largest providers of container transportation services.[1] The combined business became the leading provider of fully integrated, port-to-door containerized logistics services in the US. The acquisition of XPO Logistics was funded by USD 725m in term loans and two tranches of revolver loans totaling USD 150m. The term loans and revolvers are syndicated loans and are governed by a credit agreement, under which Reception Purchaser is the borrower and Antares Capital is the administrative and collateral agent. The loans were secured by a first priority lien on STG’s[2] assets, the most significant of which were two key business segments: (i) the less-than-truckload shipping (LTL) segment; and (ii) the STG distribution (STGD) segment.

Axos holds a position in the term loans and Siemens holds both a portion of the term loans and revolver loans. Both plaintiffs purchased their loans shortly after the initial syndication in 2022. Various Antares investment funds and vehicles also held a portion of the loans which, as further discussed below, have been prepaid in connection with the dropdown transaction.

STG’s performance began to decline in 2023 and, by February 2024, it was experiencing liquidity constraints.[3] As a result, STG’s equity sponsors (Wind Point and Oaktree Capital Management) began negotiating a transaction with Antares and a steering committee comprised of a group of lenders holding a “slight majority” of the loans to address STG’s liquidity issues, according to the plaintiffs. Axos and Siemens assert that despite their efforts to join, they were excluded from the committee. In May 2024, the equity sponsors contributed USD 30m in additional equity capital to STG, and the lenders on the steering committee negotiated the fifth amendment to the credit agreement that granted STG a seven-quarter holiday from financial covenants that impose a maximum leverage ratio on the company. In return, the fifth amendment provided the following additional lender protections, most of which the plaintiffs allege Antares and STG breached in connection with the dropdown transaction. The first six provisions listed in the table below include sacred rights provisions, which may only be modified with unanimous consent of all lenders. The next six provisions prohibit parties to the credit agreement from taking various actions, and the remainder of the provisions govern the waterfall payment structure, events of default, and prepayments.

As noted in the table above, according to the plaintiffs, the lender protections included in the fifth amendment prohibited STG from (i) restructuring its debt in the future through a non-pro-rata transaction, and (ii) transferring STG’s collateral assets to an unrestricted subsidiary. As further discussed below, the plaintiffs contend that the transactions at issue violate these lender protections notwithstanding that several of these protections (those sections highlighted in the lighter shade of blue) were subsequently removed, as discussed below, by a sixth amendment.

Although we have not seen a comparable litigation over a dropdown transaction since J. Crew, we note that this litigation also raises a host of additional issues that do not appear to have comparable precedent, including (i) whether the pre-payment of the lenders’ loans constitutes a discounted buyback given that the funds ultimately came from outside the company and the buyback offer was not made to all lenders, and (ii) whether the transactions discussed below should be collapsed into a single transaction.

The dropdown and double dip

After STG released its second-quarter financials showing continued poor financial performance, according to the amended complaint, Axos and Siemens learned that Antares, which owed obligations to all lenders as agent under the credit agreement, had become a party to a non-disclosure agreement in relation to an allegedly “secret negotiation” occurring among STG, its equity sponsors, and a new ad hoc group of lenders comprised of some of the same lenders that were part of the steering committee. Thereafter, the lenders in the ad hoc group, STG, and Antares entered into the transactions at the heart of the complaint.

• First, they entered into the sixth amendment to the credit agreement that stripped away many of the lender protections contained in the fifth amendment and granted STG the right to refuse to make interest payments before maturity without triggering a default that would entitle lenders to enforce remedies for such non-payment. The sixth amendment also struck covenants to maintain financial statements of unrestricted subsidiaries, notify lenders of major events such as events of default, and maintain books for the agent to inspect. Also, through the sixth amendment, STG and the participating lenders reintroduced the company’s ability to designate unrestricted subsidiaries, which had been eliminated by the fifth amendment.
• Second, STG created an unrestricted subsidiary (UnSub) that was not subject to the credit agreement’s liens and guarantees, and transferred substantially all of STG’s assets (including the LTL and STGD business segments) to UnSub, leaving STG with no material assets to collateralize the plaintiffs’ loans.
• Third, STG prepaid in full the loans of the lenders in the ad hoc group at a premium to their trading price – at or near the face value of the loans – in exchange for those lenders’ simultaneous extension of new loans to UnSub (UnSub Loans) via a new credit agreement that was executed on the same day as the sixth amendment (the Dropdown Credit Agreement). Specifically, the ad hoc group lenders extended UnSub USD 137m in new debt financing in the form of first lien first out (FLFO) loans, and extended UnSub a mix of FLFO loans and first lien second out (FLSO) term loans. This USD 137m loan was never intended to fund UnSub, according to the plaintiffs, but instead was intended to be loaned back to STG. The new UnSub loans were backed by the assets transferred to UnSub, as well as a first-lien guarantee from STG and an interest in an up to USD 941m first lien secured intercompany loan that UnSub extended to STG pursuant to an agreement also signed that same day (Intercompany Loan). Both the first-lien guarantee and the first-lien security interest in the Intercompany Loan sit pari passu with the liens held by plaintiffs and other excluded lenders.

STG then offered a less-favorable deal to lenders outside of the ad hoc group in exchange for their release of claims challenging the propriety of the transactions. Specifically, STG proposed to prepay these lenders’ loans in exchange for extending UnSub a mix of FLSO and first lien third (FLTO) out debt on worse terms than the lenders in the ad hoc group received. According to Axos and Siemens, this offer “was coerced through non-disclosure agreements that precluded lenders from speaking to one another regarding the impending Scheme or coordinating potential challenges thereto” and lenders who accepted this offer were required to agree not to challenge the transaction in court. Thereafter, STG extended the lenders initially excluded from the first two offers (including the plaintiffs) an even worse deal in exchange for a release. Specifically, STG offered to prepay those lenders’ term loans in exchange for new UnSub loans by giving them 40 cents of FLSO UnSub loans for every dollar of prepaid term loans, plus 30 cents of FLTO UnSub loans for every dollar of prepaid term loans. Lenders accepting this offer would thus take a much deeper discount on their term loans than the lenders who participated in the two prior offers, with a worse mix of UnSub loan tranches that would sit lower in priority. As for the revolver, STG offered to have those loans prepaid in exchange for 100 cents on the dollar of FLSO UnSub loans, lower in priority than the FLFO UnSub loans held by lenders in the ad hoc group. Any lender that accepted the offer must have agreed not to challenge the transaction in court.

As a result of the transactions, the participating lenders have (x) a first-lien security interest in the assets transferred to Unsub, and (y) two first-lien claims on the assets remaining with STG. The two claims on the assets remaining with STG stem from (1) the intercompany loan from Unsub to STG, which was pledged to the participating lenders to secure the new debt and which is secured by STG’s remaining assets, and (2) the guaranty by STG of the loan extended by participating lenders to Unsub, which again is secured by STG’s remaining assets.  This type of transaction is commonly referred to as a “pari plus double dip.”  A double-dip transaction is a type of financing in which a new-money creditor seeks to maximize its recovery in an anticipated restructuring by establishing multiple independent allowed claims against the borrower on account of the same debt (here, the direct claim against STG’s assets via the guaranty and the indirect claim against those assets via the pledged intercompany loan, both of which are pari passu with (and thus dilute) the claims of borrower’s other first lien creditors).  The “plus” component of the pari plus double dip in this instance is the direct claim on the assets transferred to Unsub, which is structurally senior to the claims of STG’s first-lien creditors.

For better and for worse

After the dropdown transaction and the extension of new loans to UnSub, the proceeds of which were loaned to STG through the intercompany loan agreement, the plaintiffs argue that the participating lenders improved their positions and thereby left the excluded lenders significantly worse off. Specifically, the participating lenders: (i) received improved priority on the collateral and assets transferred to UnSub; (ii) retained the credit support of STG’s remaining assets through new liens and guarantees on those assets; and (iii) received enhanced covenants in the Dropdown Credit Agreement that included materially better lender protections (such as a prohibition on the creation of unrestricted subsidiaries). Axos and Siemens further assert that, despite the new UnSub loans being less risky than the excluded lenders’ loans due to their improved credit support, the UnSub loans “perversely bear a higher interest rate than the Loans held by Excluded Lenders, who received no compensation for the much greater risk they now face as a result of the Scheme.”[4]

Axos and Siemens further contend that they (i) lost all liens on, and guarantees provided by, the assets transferred to UnSub, (ii) had their liens on remaining STG assets diluted by the pari passu first-lien guarantee of the UnSub loans and UnSub’s pari passu first-lien secured intercompany loan, (iii) were left with a credit agreement stripped of substantially all affirmative and negative covenants, substantially all events of default, mandatory prepayments, and any obligation to make pre-maturity interest payments, and (iv) no longer have access to financial information reports.

Perhaps most strikingly, Axos and Siemens argue that they now face STG’s refusal to make interest payments before maturity without triggering an event of default (EOD). Put more bluntly, they are no longer entitled to seek remedies for STG’s failure to make interest payments, arguably core benefits of the bargain to any lender. Furthermore, after the sixth amendment, the seven-quarter holiday from compliance with leverage covenants has become permanent, meaning that STG kept and improved on the benefit it received in exchange for the added lender protections contained in the fifth amendment while simultaneously eliminating those protections without the consent of the adversely affected lenders. In sum, Axos and Siemens contend that their loans are now essentially unsaleable not only because of the factors listed above, but also because only a small fraction of the loans remain after the dropdown transaction. After the transaction, prices on the term loans dropped to 47 cents, down from 72 cents.

Breach of contract allegations – pleading the fifth, invalidating the sixth

The crux of the complaint is that STG, and in some cases, Antares, breached various provisions of the fifth amendment to the credit agreement by entering into the sixth amendment and dropdown transactions. These breach of contract claims are summarized in the following table.

In short, Axos and Siemens argue that the sacred rights provided in the fifth amended required consent from all directly and adversely affected lenders to any amendment that would (i) postpone interest payments, (ii) reduce the principal amount of the lenders’ loans through non-pro-rata prepayments, (iii) alter the priority or pro rata treatment of the loans, (iv) release substantially all collateral securing the loans, and/or (v) subordinate lenders’ existing loans or liens securing to other loans or liens. They argue that the sixth amendment and subsequent dropdown transaction resulted in all five of these actions without their consent.

Other than the first claim listed in the table above, all breach of contract claims rely on provisions of the fifth amended credit agreement – most of which were stricken by the sixth amendment. Thus, to succeed, the plaintiffs need to show that the sixth amendment is void. To this point, they argue that the sixth amendment is void because it could not be validly executed without unanimous lender consent (and Axos and Siemens did not consent) because it implicates their sacred rights. They also contend that the amendment and dropdown transaction constitute one transaction that can be avoided under New York state law. The defendants have moved to dismiss the avoidance claim on the grounds that Illinois avoidance statute, rather than the New York statute, governs.

The defendants fire back in a number of ways in moving to dismiss the complaint, with the most significant arguments being that (i) the plaintiffs lack standing under the no action clause, (ii) the sixth amendment did not directly impact sacred rights and consequently did not require the plaintiffs’ consent, and therefore supersedes the fifth amendment, and (iii) the sixth amendment and dropdown transactions constitute multiple transactions, rather than a single transaction.

J Crew is a timeless classic

The defendants argue that the court need not consider any of the plaintiffs’ legal arguments because the plaintiffs lack standing to bring the action based on the no action clause contained in both the fifth, and sixth amended versions of the credit agreement, which provides as follows:

“Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan Documents for the benefit of all the Secured Parties . . . .”

Thus, the defendants argue that the broad language provides that only Antares – as agent under the credit agreement – may bring an action to enforce rights or remedies under the credit agreement. The defendants rely on the New York state court’s 2018 ruling in J.Crew that also considered a no action clause in the context of a complaint brought by lenders concerning a dropdown transaction.[5] In that case, the court explained that “if the lenders expressly agree to delegate to an agent the exclusive right to bring legal action to enforce the lenders’ rights, courts will hold the parties to their bargain.” The J. Crew lenders had argued that they should not be bound by the no action clause because demanding that the agent bring the action on their behalf would have been futile. The court rejected that argument and agreed with prior New York court rulings holding that, “even where one class of lenders is made worse off by a challenged transaction, so long as those lenders’ contractual rights are not alleged to have been violated and the trustee is not alleged to have engaged is misfeasance or abdication of its responsibilities, the no-action clause will bar their suit.”

Against this precedent and the broad language in the no action clause at issue, it would seem that the defendants have a compelling argument that the plaintiffs lack standing to bring the action. However, in light of the court’s ruling in J. Crew, the plaintiffs have alleged that their contractual rights have been violated, and that Antares, as agent but also a lender, refused to share financial information with the plaintiffs when it signed a confidentiality agreement. This could amount to an allegation that Antares abdicated its responsibilities to the plaintiffs, allowing them to survive the motion to dismiss.[6]

Nothing’s sacred

Addressing each breach of contract claim in turn, defendants argue that the sixth amendment did not impact sacred rights and thus no breach took place. According to them:

• the sixth amendment did not change interest payment due dates. Giving STG the discretion to unilaterally extend the grace period on interest payments until maturity without triggering an EOD does not constitute a change of interest payment due dates. It only changes what constitutes an EOD. Here, the defendants rely on a New York court’s ruling in Mitel: “Had the parties wanted [amendments to an EOD] to be covered [in the sacred rights], they could have used language to that effect, as they did elsewhere.”[7] Also, the plaintiffs cannot claim they have suffered any damages, according to the plaintiffs, because they have not failed to receive any interest payments on the stated due dates;
• the sacred right prohibiting the reduction of principal on any loan is not implicated by the sixth amendment because the sixth amendment itself did not reduce principal on any loans. Instead, the dropdown transaction effectively reduced the participating lenders’ loans. Also, the lenders contend that the repayment of the participating lenders’ loans constituted a discounted buyback buybacks (i.e., – a voluntary prepayment from internally generated funds – i.e., the intercompany loan proceeds), which is permitted under the credit agreement. The lenders also argue that the provision only protects lenders who are directly affected, and the reduction of other lenders’ loans does not directly affect the plaintiffs;
• the sixth amendment did not amend the agreement’s pro rata payment scheme simply because it resulted in the structural subordination of plaintiffs’ liens. According to STG, that argument is contrary to the language of section 10.1(a)(iv)(A), which prevents an “up-tiering” transaction like the transaction in Mitel that imposes additional senior liens on shared collateral. It does not prevent the incurrence of structurally senior liens on collateral that is no longer part of the lenders’ collateral package following the dropdown transaction;
• the sixth amendment itself did not transfer any collateral, and therefore the plaintiffs’ consent was not required under the fifth amendment; and
• the sixth amendment itself did not directly impact the liens securing, or payment obligations on, plaintiffs’ loans. The lender defendants also argue that the fifth amended only prohibits structural subordination – i.e., that lenders cannot directly access the value of a subsidiary’s assets to satisfy their loans until that subsidiary’s creditors are fully paid.

Collapsing transactions

As noted above, many of the defendants’ defenses to the breach of contract claims rely on the argument that the sixth amendment, in itself, did not violate provisions of the fifth amendment, but if anything, the plaintiffs’ rights were impacted by the transactions that took place after the sixth amendment – i.e., the dropdown transaction. Thus, whether the sixth amendment and the subsequent transactions can be collapsed into a single transaction potentially will, in large part, be determinative of these claims. According to the defendants, each step of the transaction was “separate and independent” because “the parties entered into separate written agreements with separate assents.”[8]

Under Second Circuit caselaw, contracts remain separate unless their history and subject matter show them to be adequately unified, with the deciding factor largely being the parties’ intent. In the absence of some clear indication that the parties had a contrary intention, contracts manifesting separate assents are generally presumed to be separable. However, multiple transactions may, under appropriate circumstances, be “collapsed” and treated as phases of a single transaction for purposes of analysis under fraudulent conveyance statutes and breach of contract claims. While a party’s intent as to whether transactions were intended to be a singular transaction is typically a question of fact, the question is a matter of law if the documents reflect no ambiguity as to whether they should be read as a single contract.

When deciding whether to collapse multiple transactions into one, courts consider whether the transactions were between the same parties, executed on the same date, and executed individually. Agreements that are executed at substantially the same time and relate to the same subject matter can be read together as one. Moreover, New York courts have held that although form is not conclusive, the fact that the parties entered into separate written agreements with ‘separate assents’ rather than a ‘single assent’ is influential. That said, courts consider several factors, including (i) identity of the parties to the agreements, (ii) mutual dependence of the contracts, (ii) absence of cross-reference, and (iii) their different purposes.

Based on the allegations in the complaint, the plaintiffs should have a strong likelihood of defeating the defendants’ motions to dismiss on this point. For one, the sixth amendment paved the way for the subsequent transactions – i.e., the creation of UnSub and transfer of substantially all of STG’s assets to the UnSub, the prepayment or “discounted buyback” of the defendant lenders’ loans in exchange for the extension of new loans by those lenders to UnSub, and UnSub’s subsequent provision of the loan proceeds to STG pursuant to an intercompany loan agreement. Moreover, the sixth amendment, UnSub credit agreement and intercompany loan agreement were all executed on the same day and, according to the complaint, the defendants never intended that the funds provided pursuant to the UnSub credit agreement would stay with UnSub. Rather, the parties intended that the funds would immediately be made available to UnSub. These alleged facts, collectively, should allow the plaintiffs to survive the motion to dismiss on this issue which, as discussed above, is central to several of their legal arguments.

Relief requested

In terms of relief, Axos and Siemens seek declaratory judgments that (i) the sixth amendment is void, and (ii) an EOD has occurred under section 8.1(c) of the fifth amendment. They also seek avoidance of all transfers made, and debt, liens and obligations incurred in connection with the dropdown transaction, and various forms of specific performance, including orders directing:

• STG and Antares to perform their obligations under section 2.10(a) of the fifth amendment requiring STG to prepay enough of the plaintiffs’ loans to ensure ratable prepayments and requiring Antares to distribute payments for the ratable account of all lenders;
• STG to prepay enough of the plaintiffs’ term loans and revolvers to ensure all prepayments comply with the waterfall provisions of the fifth amendment;
• STG to distribute an amount equal to the Net Issuance Proceeds[9] from the UnSub loans for applications to the loans under the credit agreement governing the plaintiffs’ loans in accordance with section 2.8(f) of the fifth amendment.

Axos and Siemens also seek damages in an amount to be determined at trial, and indemnification, including for their attorneys’ fees and other costs.[10]

The following table identifies counsel to key parties to the litigation.

The participating lenders represented by Gibson, Dunn & Crutcher include Deutsche Bank AG (New York and London branches), Citizens Bank, Prudential Hong Kong Limited, and various Audax, Fortress Credit, Pennant Park, Blue Mountain, Fidelity, and Ballyrock entities.

Focus on the initial legal issues

The STG dropdown litigation raises a host of legal issues. The threshold issue will be whether the no action clause will stop the plaintiffs in their tracks before they even get started. While the clause in the credit agreement contains broad and unqualified language that would favor dismissal, in reliance on the J. Crew ruling, the plaintiffs might have a shot at overcoming this barrier with their allegations that “Plaintiffs found it increasingly difficult to obtain any information from Antares” given that Antares signed on to a nondisclosure agreement as it too held an investment in the loans.

Another central issue is whether the multiple transactions should be collapsed into a single transaction, which would defeat the lenders’ arguments that the sixth amendment did not violate sacred rights provisions – if anything, the subsequent transactions violated those rights. Collapsing the transactions would strengthen the plaintiffs’ breach of contract claims and claims that the sixth amendment should therefore be invalid. As discussed above, although there is a presumption that separately executed agreements should be treated as individual contracts, the fact that the transactions at issue were executed on the same date and largely involved the same parties and subject matter should give the plaintiffs a fighting chance at surviving a motion to dismiss.

With respect to the breach of contract claims concerning the payment reduction or “discounted buyback” of the participating lenders’ loans, the lenders rely on the decision in Mitel for their argument that “the effect on plaintiffs’ loans was indirect” because the transaction did not “‘waive[], amend[], or modif[y]’ the terms of any loans” held by plaintiffs. This narrow view, adopted by the Mitel court, would ignore the fact that the loan prices plummeted after the transaction and the plaintiffs’ loans are now essentially unsaleable as a result. Moreover, the discounted buyback argument requires the defendants to show that the funds used to pay down the participating lenders were internal funds, which could be a difficult hurdle given that the proceeds of the intercompany loan were essentially the proceeds of the UnSub loan provided by the participating lenders. Moreover, it is often the case that a discounted buyback provision requires that the buyback offer to be made to all lenders on a pro rata basis, but an unredacted view of the credit agreement has not been made public to determine whether this is the case here.

It is important to note that, based on the arguments discussed above, the Court could dismiss some parts of the complaint and not others, and therefore it is not a zero sum game at this point, except with respect to the no action clause. That said, when a lender that is not part of an ad hoc group is presented with a decision over whether to participate in a second round (and worse deal) transaction, it should take a close look at the no action clause contained in its loan documentation before deciding whether to fight the transaction in court or take the loss. Here, the plaintiffs turned down subsequent offers and have now found themselves in the throes of litigation, as they are unable to sell their positions given that there is no longer a market for them, in light of the fact that there is only a relatively small position left in the loan because most other significant lenders have already participated.

Related Links:

Amended Complaint
Lender Defendants Motion to Dismiss
Antares Motion to Dismiss
Sentry Motion to Dismiss
STG Motion to Dismiss

Prior to joining Debtwire, Sara was a law clerk to two judges in the United States Bankruptcy Court, S.D.N.Y. and practiced in the Financial Restructuring Group at Clifford Chance, where she represented financial institutions (as secured and unsecured creditors, defendants in adversary proceedings, and participants in DIP financings) in high-profile restructurings. She also represented foreign representatives in Chapter 15 cross-border cases.

This article should not be relied upon to make investment decisions. Furthermore, this article is not intended and should not be construed as legal advice. ION Analytics does not provide any legal advice, and clients should consult with their own legal counsel for matters requiring legal advice. All information is sourced from either the public domain, ION Analytics data or intelligence, and ION Analytics cannot and does not verify or guarantee the adequacy, accuracy or completeness of any source document. No representation is made that it is current, complete or accurate. The information herein is not intended to be used as a basis for investing and does not constitute an offer to buy or sell any securities or investment strategy. The information herein is for informational purposes only and ION Analytics accepts no liability whatsoever for any direct or consequential loss arising from any use of the information contained herein. 

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[1] Unless otherwise noted, the facts discussed herein are as alleged in the amended complaint.

[2] Reception Holdings is the parent company of Reception Purchaser and is a party to the credit agreement. STG Distribution Holdings and STG Distribution are unrestricted subsidiaries of STG formed as part of the LME. In the amended complaint, the plaintiffs refer to Reception Mezzanine and Reception Purchaser as STG.

[3] Financial difficulties in 2023 were attributed to market trends shifting away from goods and towards consumer services and the industry facing strikes, labor shortages, and regulatory scrutiny. Also, in December 2023, STG was sued by the New Jersey attorney general for abusing its workforce by misclassifying employees as independent contractors, following civil class actions challenging the same practices.

[4] The loans to STG bear an interest rate of SOFR plus 6%, while the loans to UnSub bear interest rates of SOFR plus 8.3%, SOFR plus 7.5% and SOFR plus 7%.

[5] See Eaton Vance Management v. Wilmington Sav. Fund Soc., FSB (Sup. Ct. of N.Y. 2018).

[6] Antares has also argued that claims asserted against it are prohibited by an exculpation clause in the credit agreement.

[7] See Ocean Trails CLO VII v. MLN Topco (“Mitel”), 225 N.Y.S.3d 192, 196 (1st Dep’t 2024).

[8] See Lender Defendants memorandum of law in support of their motion to dismiss, citing Rudman v. Cowles Commc’ns, 280 N.E.2d 867, 873 (1972).

[9]  “Net Issuance Proceeds” are defined as “cash proceeds (including proceeds as and when received in respect of non-cash proceeds received or receivable in connection with such issuance), net of underwriting discounts and out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of a Borrower.”

[10] Under section 10.6(a) of the credit agreement, as amended by the fifth amendment, STG agreed to indemnify, hold harmless and defend each lender from and against liabilities, including attorneys’ fees, that may be imposed on them or they may incur in any matter relating to or arising out of or in connection with any loan document.