Second Circuit – Trust Indenture Act: Chatham Capital Holdings Inc. v. Conru

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United States Court of Appeals for the Second Circuit

Trust Indenture Act

Private exchange offer

Chatham Capital Holdings Inc. v. Conru

23-154

Judges Jacobs, Wesley, and Robinson

Background: The plaintiffs are two investment firms who hold debt securities issued by the defendant. The defendant issued securities through an exchange offer and, several years after the offer, the defendant’s founder, acting through a trust in his own name, reduced the payment terms of the securities under the governing indenture. The plaintiffs allege that this action forced them to sell their stake back to the defendant at a discount. The plaintiffs sought leave to amend their complaint to argue that the Trust Indenture Act protected the indenture and prevented the defendant and its founder from changing the payments terms without the plaintiffs’ consent. They appeal from the dismissal of their complaint.

Ruling: The Second Circuit affirmed. The court held that the TIA does not protect this indenture because the underlying exchange offer was a private placement under the Securities Act. The TIA does not apply to private placement. Absent the TIA’s protections, a “no-action” clause in the indenture bars the plaintiffs’ claims.

Steven M. Kayman, of Rottenberg Lipman Rich, for the plaintiffs-appellants; Lawrence Robbins, of Friedman Kaplan Seiler Adelman & Robbins, for the defendants-appellees.

Oral argument audio