## Facts

- Cash America International, Inc. issued \$300 million of 5.75% senior notes due 2018 under a New York-law indenture; Wilmington Savings Fund Society, FSB served as indenture trustee for the noteholders.
- The indenture restricted asset dispositions, generally permitting them only if the aggregate book value of disposed properties did not exceed 10% of consolidated total assets; exceeding the threshold constituted an event of default.
- Upon an event of default, the trustee or requisite holders could accelerate the notes, but the indenture also preserved the trustee’s ability to pursue “any available remedy” to enforce indenture provisions.
- The indenture contained an optional pre-maturity redemption provision allowing Cash America to redeem the notes at a “make-whole” redemption price; it did not state that default or acceleration itself triggered a make-whole payment.
- Enova International, Inc., a wholly owned subsidiary operating Cash America’s e-commerce business, represented a substantial portion of Cash America’s revenue before the note issuance.
- Cash America implemented a transaction distributing 80% of Enova’s stock to Cash America shareholders and listing Enova as a separate public company; Cash America itself received no consideration.
- A noteholder asserted the spin-off would trigger an event of default and demanded redemption with the make-whole; Cash America disputed both breach and the availability of any make-whole remedy.
- Wilmington sued, alleging the spin-off breached the asset-disposition covenant and seeking specific performance requiring redemption at the make-whole price; both sides moved for summary judgment.

## Issues

1. Whether distributing 80% of a valuable subsidiary’s shares to shareholders constituted a prohibited “disposition” of “property” exceeding the indenture’s 10% book-value threshold and therefore an event of default.
2. If an event of default occurred, whether the trustee and noteholders were limited to acceleration (par repayment) or could obtain specific performance compelling redemption under the optional redemption clause, including the make-whole premium.

## Decision

- The court granted summary judgment for Wilmington and denied summary judgment for Cash America.
- The court held the Enova spin-off was a disposition of Cash America property that exceeded the indenture’s threshold and breached the asset-disposition covenant, creating an event of default.
- The court held acceleration was not an exclusive remedy because the indenture preserved other remedies to enforce performance.
- The court ordered specific performance requiring Cash America to redeem the notes pursuant to the redemption provision and to pay the make-whole redemption premium; calculation of amounts and fees was left for further proceedings.

## Legal Principles

- Under New York contract law, indentures are enforced according to their text; where an indenture preserves non-exclusive remedies, a permissive acceleration clause does not bar other relief.
- A transfer can constitute a “disposition” of “property” under an asset-disposition covenant where an issuer distributes ownership interests in a valuable subsidiary and receives no consideration.
- When an issuer voluntarily causes an early maturity through a covenant breach and the indenture preserves non-exclusive remedies, a court may order specific performance of a redemption provision and require payment of the contractually defined redemption price, including a make-whole premium.
- New York decisions limiting make-whole recovery after automatic acceleration (often in bankruptcy contexts) may be distinguished where the default results from a voluntary, out-of-court transaction and the trustee elects non-acceleration remedies preserved by the indenture.

## Conclusion

The court concluded that Cash America’s subsidiary spin-off violated the indenture’s asset-disposition covenant and that, because the indenture preserved non-exclusive remedies and the breach was voluntary, the proper remedy was specific performance compelling redemption of the notes at the contractual make-whole price rather than limiting noteholders to par repayment through acceleration.


Wilmington Sav. Fund Soc’y, FSB v. Cash Am. Int’l, Inc., No. 15 Civ. 5027 (JMF), 2016 WL 5092594 (S.D.N.Y. Sept. 19, 2016)