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Note: In order to finance the acquisition of Realogy Corporation (Corporate Debtor), a company providing real estate and relocation services, by Apollo Management, L.P., Corporate Debtor issued various debt instruments. The senior instruments supported a US$3,170,000,000 term loan facility and a US$750,000,000 revolving loan and LC facility. Under a Credit Agreement, JP Morgan Chase Bank acted as administrative agent for lenders including those to whom the agent syndicated the loans. At the same time and in addition, Corporate Debtor issued several classes of notes including US$582,000,000 in notes (Senior Toggle Notes) that require semi-annual interest payments but, unlike other notes issued, permit payments to be "paid-in-kind ("PIK") with additional Senior Toggle Notes, effectively allowing [Corporate Debtor] the flexibility to capitalize a portion of its inherent expenses if it so chooses."

With the implosion of the real estate industry, the value of the notes collapsed and the opinion reported that the Senior Toggle Notes "trade at just below 18 cents on the dollar". In order to take advantage of the radical drop in price, Corporate Debtor decided to refinance its debt secured by its assets in exchange for the existing notes.

Alleging that this program could breach the indenture under which the Senior Toggle Notes operated, the majority of the Senior Toggle Notes holders opposed the refinancing and The Bank of New York Mellon, Indenture Trustee under the Indenture Agreement, sued Corporate Debtor seeking a declaration that the refinancing would constitute a fraudulent transfer. Applying the laws of New York, the Delaware Court of Chancery, Lamb, V.C., issued a declaratory judgment in favor of Indenture Trustee, concluding that the refinance proposal did not meet the definition of a permitted refinancing in the bank credit agreement which was incorporated by reference into the Indenture Agreement.

Indenture Trustee argued that certain provisions of the Credit Agreement permitted only loans funded by cash. Although the Chancellor concluded that Indenture Trustee's position was sustained by other provisions in the Credit Agreement, it rejected this argument. The Chancellor pointed to a provision that permitted Corporate Debtor "to request a new revolving loan in order to fund an obligation to reimburse a letter of credit disbursement." Under the Credit Agreement the Chancellor noted that, "the loan is created in consideration of the extinguishment of [Corporate Debtor]'s obligation to reimburse the Lenders for funding under a letter of credit drawn on the credit facility." The Chancellor concluded that the interpretation proposed by the Indenture Trustee would be inconsistent with the text of these provisions.

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