In Re BankAtlantic Bancorp Inc. Litigation, Consol. C. A. No. 7068-VCL (Del. Ch. Feb. 27, 2012). This 42-page opinion of the Delaware Court of Chancery, along with a 14-page appendix to the opinion, permanently enjoined Bancorp from consummating the sale of its equity to BB&T Corporation, after a 3-day trial. This decision has received widespread coverage in the press, such as the South Florida Business Journal.
The Court’s opinion provides detailed factual background and a thorough legal analyis to support its reasoning that the prerequisities for injunctive relief were met. Only a cursory overview will be provided in this short post.
First, the Court explained in great detail why the plaintiffs who objected to the sale established a likelihood of success on the merits because the sale would breach the successor obligor provision and constitute an event of default.
Second, irreparable harm was demonstrated because the sale-triggered event of default would give the trustees the right to accelerate payment of debt securities in the amount of $290 million that the seller could not pay. Contrary to the requirements in the relevant debt instruments, the buyer, BB&T, was not assuming those liabilities. In addition to the harm from non-payment, terms of the deal providing for unjustified personal payments to key insiders, which reduced the total purchase price, “will violate the absolute priority rule“.
Third, the balance of the hardships favored the grant of injunctive relief. The Court was not persuaded by Bancorp’s apocalyptic hyperbole that an injunction would result in Bancorp’s failure as an entity and that the status quo (without a sale) is not tenable. The Court cited to evidence at trial that supported the Court’s holding.