EB Holdings II court denies PIK loan trustee request for fast ruling

New York, May 22 – Judge Mike Nakagawa overseeing EB Holdings II, Inc.’s involuntary Chapter 11 case denied a request from GLAS USA LLC as trustee for a €600 million PIK loan agreement to give a rapid hearing on a request to allow action in a state court, according to filing with the U.S. Bankruptcy Court for the District of Nevada.

GLAS had asked that its request be heard on a shortened timescale to prevent EB Holdings from “taking unfair advantage” of the automatic stay while GLAS is prevented from “protecting its own rights and remedies.”

But EB Holdings argued that GLAS was only prevented from defending itself by the involuntary action that GLAS itself had filed against EB Holdings – and that GLAS has opposed dismissal of the involuntary bankruptcy case.

Instead, EB Holdings accused GLAS of staging an “ambush, plain and simple.”

Comparing GLAS to the boy who cried wolf, EB Holdings said GLAS’s case is “undermined by its insistence that every request constitutes an emergency, particularly when doing so creates a strategic advantage to GLAS.”

GLAS is requesting relief from the automatic stay created by a bankruptcy filing in order to respond to litigation in state court in Nevada.

In its filing with the bankruptcy court, GLAS said that EB Holdings has commenced suit against GLAS in Nevada state court seeking a declaratory judgment that the outcome of the existing state court litigation should determine rights under the PIK loan agreement based on provisions in the PIK loan agreement that EB Holdings claims allow the state court lenders to bind GLAS and the other lenders. GLAS and 25% of the lenders are not involved in the state-level litigation.

GLAS claims that EB Holdings is using the Nevada bankruptcy court’s rules requiring that parties meet and confer in good faith to obtain “improper tactical litigation advantage.”

In December 2017, the bankruptcy court stayed prosecution of claims for the $2 billion owing under the PIK loan until the state court litigation is completed. A trial was expected in April.

However, the trial has been postponed until 2019.

GLAS is now planning to ask the bankruptcy court to lift the stay order so that the claims it is pursuing on the 25% of lenders not involved in the state litigation can be heard in bankruptcy court.

EB Holdings II is a Carson City, Nev.-based metals and mining company. The involuntary case was filed on May 18, 2017 under Chapter 11 case number 17-12642.

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