## Facts

- A Delaware limited partnership’s coal business was financed in part through 7.875% senior notes due 2021 issued by two subsidiaries under an indenture; other subsidiaries guaranteed the notes and held operating assets.
- The indenture required the issuers, upon a defined “Change of Control,” to offer to redeem the notes at 101% of principal plus accrued interest.
- “Change of Control” turned on whether a person other than the incumbent controller became the “beneficial owner” (by reference to Exchange Act Rule 13d-3) of more than 35% of the general partner’s “voting stock,” broadly defined as securities with power to control the general partner.
- A proposed acquisition by Murray Energy initially would have transferred significant voting and economic interests plus governance and operational rights that would have triggered the redemption obligation; the issuers sought noteholder consents to waive the provision for an 8% fee.
- After financing failed, the parties terminated the original deal and restructured a new set of arrangements designed to stay under the nominal 35% voting threshold while providing Murray extensive rights, including veto rights over major actions, influence over senior management, and a long-term management agreement.
- The successor indenture trustee sued, alleging a change of control occurred and that the issuers defaulted by failing to make the required redemption offer; it also pleaded an implied covenant claim and sought fees and expenses under the indenture.
- The parties filed cross-motions for judgment on the pleadings.

## Issues

1. Whether the restructured transaction resulted in a contractually defined “Change of Control,” requiring a 101% redemption offer.
2. If a change of control occurred, whether the issuers breached the indenture by failing to make the redemption offer and whether the trustee was entitled to contractual fees and expenses.
3. Whether an implied covenant of good faith and fair dealing claim should be addressed where the indenture’s express terms provided a basis for relief.

## Decision

- The court granted the trustee’s motion for judgment on the pleadings on the breach of indenture claim, holding a Change of Control occurred and the issuers defaulted by not making the redemption offer.
- The court granted judgment for the trustee on its claim for attorneys’ fees and expenses under the indenture’s fee provisions.
- The court denied judgment on the implied covenant claim as moot because the dispute was resolved under the indenture’s express language.
- The court denied the defendants’ cross-motion for judgment on the pleadings.

## Legal Principles

- Delaware courts enforce clear indenture language as written, including defined terms that incorporate federal securities-law concepts such as “beneficial ownership” under Rule 13d-3.
- Where “voting stock” is defined functionally as power to control, control analysis is not limited to formal voting percentages; governance rights, veto powers, management-control rights, and operational management arrangements can confer contractual control.
- Transaction structuring intended to avoid a numerical threshold does not prevent a change-of-control trigger if the resulting rights and arrangements meet the indenture’s defined control standard.
- The implied covenant of good faith and fair dealing is not used to supply relief where the contract’s express terms address the situation; if an express breach is found, implied covenant claims may be unnecessary or moot.
- If an indenture provides for reimbursement of trustee enforcement costs upon default, a trustee may recover attorneys’ fees and expenses when it prevails on enforcing the indenture.

## Conclusion

The court held that the restructured Murray-related transaction transferred contractual control as defined by the indenture, triggering the change-of-control redemption obligation; the issuers’ failure to make the redemption offer was a default, entitling the trustee to enforcement relief and contractual fees, while rendering the implied covenant claim moot.


Wilmington Sav. Fund Soc'y, FSB v. Foresight Energy LLC, 2015 WL 7889552 (Del. Ch. 2015)