## Facts

- Liberty Media Corporation issued public debt under an indenture naming Bank of New York Mellon Trust Company, N.A. as trustee; the indenture was governed by New York law.
- The indenture contained a standard “successor obligor” covenant restricting Liberty from transferring “all or substantially all” of its assets unless the transferee assumed Liberty’s obligations under the indenture.
- The covenant referenced compliance “immediately after giving effect” to a “transaction or series of transactions,” tying that determination to whether an event of default occurred.
- Over roughly seven years, Liberty completed three major spin-off/split-off transactions transferring approximately 19%, 10%, and 23% of its assets, respectively.
- Liberty then announced a fourth transaction, the “Capital Splitoff,” to separate assets and liabilities attributed to specified business groups into a new publicly traded company, removing roughly an additional 15% of Liberty’s assets.
- A bondholder asserted that Liberty’s actions reflected a long-term strategy to move substantially all assets away from the obligor and threatened to assert a default.
- Liberty filed a declaratory and injunctive action seeking a ruling that the proposed Capital Splitoff would not violate the successor obligor covenant and to prevent default declarations on that basis.
- After trial, the Court of Chancery ruled that the four transactions should not be aggregated and that the Capital Splitoff, considered alone, was not a transfer of “substantially all” assets.
- The trustee appealed.

## Issues

1. Whether the proposed Capital Splitoff had to be aggregated with three prior spin-off/split-off transactions as a “series of transactions” for purposes of determining a transfer of “all or substantially all” assets under the successor obligor covenant.
2. Whether the transactions were sufficiently connected—under step-transaction or anti-evasion principles—to be treated as steps in a single plan functionally equivalent to a piecemeal sale or liquidation of substantially all assets.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery.
- The court held that the Capital Splitoff did not violate the successor obligor covenant.
- The court held that the four transactions should not be aggregated because they were not sufficiently connected as part of a single integrated plan to circumvent the indenture.
- Because no breach occurred, the trustee lacked a basis to declare a default premised on a “substantially all assets” violation.

## Legal Principles

- Under New York law, multiple transactions may be aggregated for a “substantially all assets” analysis in a successor obligor covenant only in appropriate circumstances, typically where the transactions are part of one overall plan resembling a staged sale or liquidation.
- “Series of transactions” language in a successor obligor provision does not require automatic aggregation of temporally separated transactions; aggregation turns on whether the transactions are sufficiently connected.
- Step-transaction concepts support aggregation when formally separate transactions are substantially linked steps of a unified plan, including plans aimed at evading bondholder protections.
- Where transactions reflect distinct business decisions responding to different circumstances, and the record does not show a master plan to strip the obligor of substantially all assets, aggregation is not warranted.
- Boilerplate indenture provisions are construed with an emphasis on uniformity and predictability, limiting fact-specific expansions that would introduce uncertainty into capital market expectations.

## Conclusion

The court concluded that Liberty’s proposed splitoff did not trigger the successor obligor covenant and that the trustee could not aggregate earlier distributions absent proof the transactions were sufficiently connected as an integrated plan akin to a piecemeal sale of substantially all assets, affirming declaratory and injunctive relief for Liberty.


Bank of N.Y. Mellon Tr. Co. v. Liberty Media Corp., 29 A.3d 225 (Del. 2011)