Diamond Glass loan guarantor files suit against lender following unauthorized $10 million increase

By Caroline Salls

Pittsburgh, June 18 - Diamond Glass, Inc. principal stockholder, loan guarantor and former chief executive officer Kenneth Levine filed a complaint Wednesday against lender Guggenheim Corporate Funding, LLC in connection with a credit agreement that was allegedly increased by $10 million without Levine's consent, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

Specifically, Levine is asking the court to confirm that his guaranty was rendered unenforceable when Guggenheim agreed to increase Diamond Glass' credit facility to $45 million from $35 million, or that his guarantor obligations will be satisfied once Diamond Glass repays the original $35 million loan amount.

Because Guggenheim has allegedly already drawn down Levine's $10 million guarantied cash, Levine said the court should order the lender to repay him the $10 million, plus interest accruing since Nov. 7, 2007, if it confirms that the guaranty is unenforceable.

However, if the court instead rules that Levine's obligations will be satisfied after the original $35 million is repaid, Levine said his subrogation claim should rank senior to Guggenheim's claim for the additional $10 million loan amount.

According to the complaint, Diamond Glass and Guggenheim agreed to the $10 million increase on Nov. 7, 2007, several weeks after Levine stepped down as CEO.

Levine said Guggenheim asked for his approval, but he refused.

Now, the lender claims that Levine is automatically responsible for guaranteeing up to $10 million if Diamond Glass defaults on the 29% larger loan.

Diamond Glass, a Kingston, Pa., automotive glass replacement and repair company, filed for bankruptcy on April 1. Its Chapter 11 case number is 08-10601.

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