California Supreme Court Blocks Kayne Saybrook’s Attempt to Recover $56.5 Million Investment from Cabazon Band of Mission Indians -GoldenTree Asset Management

Court’s Denial Ends Any Imminent Ability to Recover Investment

Nearly $1 million in Attorneys’ Fees Awarded against Kayne Saybrook

RIVERSIDE, Calif.--()--In a June 11, 2014 ruling, the California Supreme Court rejected a petition by Saybrook Capital LLC’s municipal opportunities group (absorbed in 2012 by Kayne Anderson Capital Advisors) to recover on a $56.5 million junior loan to the Cabazon Band of Mission Indians.

In the case, the Riverside County Superior Court Judge John G. Evans rejected an attempt by the Saybrook group to recover on its loan after turbulent economic conditions forced the tribe to default in April 2012. Through its trustee, Saybrook sued for breach of its loan agreement and sought an injunction against the tribe and the Fantasy Springs Resort and Casino in Indio, California. A consortium of lenders led by New York-based GoldenTree Asset Management LP, who hold the senior loan, joined with the tribe in blocking Saybrook’s effort to seize casino revenues.

Wayne S. Flick, a senior partner at Latham & Watkins in Los Angeles, said the rulings were hardly surprising. “Saybrook has spent more than two years and wasted millions of investor dollars chasing after a loan it will likely never recover. Very simply, the loan by GoldenTree and the other bridge lenders, which now totals more than $180 million, is first in line. The courts have quite correctly rejected Saybrook’s misguided efforts to improve its position.”

In his ruling, Judge Evans found that while the tribe’s unpaid loan obligation to Saybrook was largely undisputed, the injunction Saybrook sought was legally barred because it would have circumvented the tribe’s carefully-negotiated capital structure. Because GoldenTree and its co-lenders have the first right to casino revenues, the Court found that Saybrook did “not have standing to complain.”

In additional bad news for Saybrook’s investors, the trial court also ordered Saybrook to pay nearly $1 million in attorneys’ fees after losing on its claim for an injunction, and rejected Saybrook’s own claim for almost $2 million in attorneys’ fees, finding that it “was not the prevailing party.” Despite handing Saybrook a judgment for money damages, the court characterized Saybrook’s ability to collect on that judgment as “extremely limited” and found that the “judgment did little to improve [Saybrook’s chances] of repayment.”

The Supreme Court’s ruling last week means that the tribe may pursue its appeal of the money judgment without posting the usual bond, and that Saybrook is barred from taking any steps to enforce the judgment in the meantime. Flick said the appeal could take years to resolve. “If I were an investor in the Saybrook funds, I’d be looking very closely at whether this loan is a total loss,” he added.

For Court documents related to the Saybrook litigation, please contact Frank Pizzurro or Scott Sunshine.

Contacts

Latham & Watkins LLP for GoldenTree Asset Management
Frank Pizzurro, 213-891-7276
Senior PR Manager
Frank.Pizzurro@lw.com
or
Water & Wall Group
Scott Sunshine, 212-625-2364
Partner
ssunshine@waterandwallgroup.com

Contacts

Latham & Watkins LLP for GoldenTree Asset Management
Frank Pizzurro, 213-891-7276
Senior PR Manager
Frank.Pizzurro@lw.com
or
Water & Wall Group
Scott Sunshine, 212-625-2364
Partner
ssunshine@waterandwallgroup.com