## Facts

- A lending syndicate financed Aladdin Gaming, LLC’s Las Vegas resort project through a $410 million loan governed by a Credit Agreement and related “Loan Documents.”
- The Credit Agreement appointed an Administrative Agent to act for the lenders and authorized it, absent contrary written instructions from “Required Lenders,” to exercise powers delegated by the loan documents.
- “Required Lenders” were those holding at least 66-2/3% of the outstanding principal and letter-of-credit participations.
- A Keep-Well Agreement, an ancillary loan document, required certain “Sponsors” (including the Sommer Trust) to provide specified financial support to the borrower upon triggering events.
- Aladdin later filed for bankruptcy; Beal Savings Bank acquired a minority participation interest (about 4.5%) in the syndicated debt by assignment.
- After the bankruptcy, 36 of 37 lenders entered a settlement with the Sommer Trust and directed the Administrative Agent to forbear from enforcing claims under the Keep-Well Agreement.
- Beal nonetheless sued the Sommer Trust for breach of the Keep-Well Agreement, asserting the Keep-Well was enforceable by “each Lender” and seeking recovery for itself or for pro rata distribution.

## Issues

1. Whether a minority lender in a syndicated loan has standing to sue a sponsor directly for breach of a keep-well agreement when the credit agreement centralizes enforcement authority in the administrative agent acting at the direction of supermajority “Required Lenders.”
2. How to reconcile keep-well language stating it is enforceable by “each Lender” with an integrated loan-document structure requiring collective action.

## Decision

- The New York Court of Appeals affirmed dismissal of Beal’s complaint for lack of standing.
- The court held the loan documents, read as an integrated whole, reflected lender intent to act collectively after default and to bar individual lenders from disrupting that framework.
- The Administrative Agent, acting under the Credit Agreement and subject to Required Lenders’ direction, was the proper vehicle for enforcement decisions concerning the Keep-Well Agreement.
- The Keep-Well’s “enforceable by each Lender” language did not authorize unilateral litigation contrary to the Credit Agreement’s collective-action and agency provisions.
- The supermajority lenders’ settlement and forbearance instruction was consistent with the contractual allocation of enforcement authority and could not be overridden by a minority lender’s separate suit.

## Legal Principles

- In a syndicated loan, courts interpret ancillary instruments in harmony with the governing credit agreement when the documents are integrated as “Loan Documents.”
- Where a credit agreement vests enforcement authority in an administrative agent subject to supermajority lender control, an individual lender generally lacks standing to pursue separate enforcement that conflicts with collective lender action.
- Contract language recognizing each lender as a beneficiary may preserve economic rights without granting an unfettered right to bring independent litigation outside the agreed collective enforcement process.
- Collective-action provisions are enforced to prevent multiple or conflicting creditor actions that would interfere with coordinated workouts, settlements, or forbearance decisions.

## Conclusion

The court held that the syndicated loan documents required collective enforcement through the administrative agent under the direction of the Required Lenders, so a minority lender could not sue the sponsor on the keep-well agreement in conflict with the supermajority’s settlement and forbearance decision.


Beal Sav. Bank v. Sommer, 8 N.Y.3d 318 (N.Y. 2007)