Kasowitz Scores Key Victory for Noteholders in Multi-Billion Dollar Student Loan Syndication Case

Kasowitz Scores Key Victory for Noteholders in Multi-Billion Dollar Student Loan Syndication Case

Kasowitz Benson Torres, on behalf of a group of noteholders in fifteen National Collegiate Student Loan Trusts, has scored another key victory in the noteholders’ legal dispute with the residual equity holders concerning the management and control of the Trusts.  On August 27, 2020, in a pathbreaking 200-page opinion, Vice Chancellor Joseph R. Slights III of the Delaware Court of Chancery adjudicated a bevy of legal and contractual issues concerning the administration of and control over the Trusts, which hold legal title to billions in student loans originated between 2003 and 2007.  All told, Chancellor Slights adjudicated 143 discrete, competing requests for declaratory relief concerning issues common to multiple lawsuits consolidated in the Delaware Chancery Court.  

The Chancery Court ruled, among other things, that the Trusts’ Granting Clauses effected an absolute assignment of the Trusts’ collateral for the benefit of the Trusts’ noteholders, and that the owners of the Trusts’ residual equity owe noteholders fiduciary duties prohibiting “self-dealing” and the “use [of] control over the Collateral to advantage the owners at the expense of the noteholders and Ambac [the Note Insurer].”   

The Kasowitz team representing the noteholders is led by partner Michael A. Hanin and includes partner Uri A. Itkin, of counsel Henry Brownstein, and associate Henry Kohji Parr.