New York Debtor Seeks Specific Performance of Agreement Against Creditor; $76 Million Mortgage Loan in Issue
March 23, 2022, New York – In the bankruptcy case of Debtors 85 Flatbush RHO Mezz, LLC, et al., Plaintiff debtor 85 Flatbush Mezz LLC, a New York limited liability company, has filed a lawsuit against a Delaware limited liability company, TH Holdco LLC (Holdco) for specific performance to enforce certain purchase option rights under the parties’ Intercreditor Agreement.
Defendant Holdco is the assignee of Debtor’s prepetition mortgage lender. The mortgage loan that is in issue, in this case, is for $76 million.
The Plaintiff, in its Complaint, alleges that the Defendant “failed to provide” the Plaintiff debtor with “the required purchase option notices” under their governing Intercreditor Agreement. This alleged failure occurred “once a declaration of a monetary default was issued” and again “when the debt was accelerated,” and the Defendant commenced a state court foreclosure action.” The plaintiff alleges that the only notice that was provided to it to cure the monetary defaults was insufficient. The Plaintiff seeks specific performance so that the Plaintiff is conferred the “right to acquire” the mortgage loan at a loan purchase price that would have been in effect when the Plaintiff received insufficient notice.
The Plaintiff, in its Complaint, states that this lawsuit “directly impacts the Defendant’s efforts to seek approval of a disclosure statement and confirmation of creditors’ plan” and the Plaintiff’s “ability to purchase the mortgage loans is an important fallback protection which has been ignored and trampled upon by the Creditor’s Plan.”
On December 18, 2020, Debtors 85 Flatbush RHO Mezz, LLC, et al. each filed voluntary chapter 11 petitions in the Bankruptcy Court for the Southern District of New York. The Debtors’ cases are being jointly administered under Lead Bankruptcy Case No. 20-23280.