''Bank of New York Mellon v. Realogy Corporation'', 2008 WL 5259732, is a case that was decided in

Delaware Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacent Del ...

Court of Chancery The Court of Chancery was a court of equity in England and Wales that followed a set of loose rules to avoid a slow pace of change and possible harshness (or "inequity") of the Common law#History, common law. The Chancery had jurisdiction over ...

in 2008. The court held that a company's proposed

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

exchange offer was not permissible under the terms of the documents governing the company's debt. The case is frequently referenced in

banking law Bank regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they ...

and is used in several

law school A law school (also known as a law centre or college of law) is an institution specializing in legal education, usually involved as part of a process for becoming a lawyer within a given jurisdiction. Law degrees Argentina In Argentina, ...

case books.

Facts

Realogy Corporation Anywhere Real Estate Inc., formerly Realogy (), is an American publicly owned real estate services company. It owns and franchises several real estate brands and brokerages, and offers consumer programs, lead generation, relocation, and title ...

had several outstanding debts and sought to refinance many of its debt notes by offering to exchange the notes for term loans under a new $500 million term loan facility. The new term loans would be issued under the

credit facility A line of credit is a credit facility extended by a bank or other financial institution to a government, business or individual customer that enables the customer to draw on the facility when the customer needs funds. A line of credit takes sev ...

and would be secured by a second lien on almost all of Realogy's assets. Because the new term loans were to be secured by second liens under the credit facility, the proposed exchange offer would have allowed the "Senior Fixed Notes" to effectively become senior to the "Senior Toggle Notes" and the "Senior Subordinated Notes" to "leapfrog" in priority over the Senior Toggle Notes. The trustee under the indenture sued Realogy on behalf of holders of the Senior Toggle Notes, arguing that the exchange offer breached the indenture.

Opinion

The court observed that an interpretation of the exclusion to the definition of "Permitted Refinancing Indebtedness" that required nothing more than compliance with the covenants would add no substance to the definition. The exclusion would then be "mere surplusage."

Impact

Although the Delaware court did not allow Realogy to pursue its proposed refinancing structure and there is always a risk of litigation where one group of creditors may be adversely affected by a proposed transaction, the court’s reasoning may actually facilitate debt exchange offers by companies.http://www.jonesday.com/files/Publication/f717800c-934e-4737-8b8c-89c5b2633736/Presentation/PublicationAttachment/794567da-f366-40dd-a99f-5c4a99597a53/Exchange%20Offer.pdf {{Bare URL PDF, date=March 2022

References

2008 in United States case law Delaware state case law 2008 in Delaware United States corporate case law Law articles needing an infobox