On August 30, 2024, Clark Smith Villazor, on behalf of its clients Knighthead Capital Management, Certares Opportunities, and investment funds they manage, filed an amended complaint against Morgan Stanley Senior Funding Inc., Brightline Holdings LLC, and various Brightline subsidiaries in New York Supreme Court’s Commercial Division.
The amendment complaint alleges that Morgan Stanley and Brightline—a Fortress Investment Group-backed private rail company—violated a credit agreement and engaged in fraud by causing a key Brightline subsidiary to issue stock to an affiliated entity at a below fair-market-value price, ceding control of that subsidiary to the affiliate in the process, and concealing the transaction from the plaintiffs.
The plaintiffs allege that this transaction was part of a scheme to help Brightline avoid paying a contractually defined “Make Whole Amount” when Brightline was required to prepay the loan that the plaintiff investment funds purchased. The plaintiffs allege that the amount due under the Make-Whole calculation is at least approximately $750 million (plus additional accrued interest from untimely repayment).
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