News

Firm Files Amicus Brief in Neiman Marcus Bondholders’ Fraudulent Conveyance Case

January 17, 2020

In December 2019, Patterson Belknap filed an amicus brief on behalf of The Credit Roundtable related to the Neiman Marcus debt restructuring. The case, UMB Bank v. Neiman Marcus Group, et al., is pending in the New York Commercial Division and raises the question of whether an indenture trustee may assert a fraudulent conveyance claim at the direction of holders prior to the occurrence of an event of default. 

In the amicus brief, The Credit Roundtable challenges the Neiman Marcus defendants’ position that an indenture trustee may not assert a fraudulent conveyance claim in the absence of an event of default under the indenture, even if the requisite threshold of bondholders directs it to do so in order to protect their interests. The Credit Roundtable argues that the defendants’ proposed rule should be rejected because it would categorically preclude trustees from asserting fraudulent conveyance claims prior to an event of default for this common form of indenture. As highlighted in the press release announcing the filing: “the brief states that the court should deny the defendants’ motion to dismiss and should allow the trustee to pursue the fraudulent conveyance claims asserted by the trustee on behalf of bondholders. The filing argues that there is no ground in law or policy for the Neiman Marcus defendants’ extreme proposal to strip indenture trustees - and thus creditors - of the right to bring fraudulent conveyance claims prior to an event of default.”

The Credit Roundtable, organized in association with the Fixed Income Forum, is a group of large institutional fixed income managers including investment advisors, insurance companies, pension funds, and mutual fund firms, responsible for investing more than $3.8 trillion of assets. The European Leveraged Finance Association, a trade association comprised of European leveraged finance investors from over 30 institutional fixed income managers representing over €230 billion in European leveraged finance assets under management, joined in the filing.

To read the full brief, click here

To read The Credit Roundtable and European Leveraged Finance Association’s press release on the brief, click here.