A federal judge told Senator Jim Justice and his family business operation to put up or shut up about a financing proposal for millions of dollars in loans at the center of a dispute over The Greenbrier Hotel, and they partially put up.
Judge Frank Volk, earlier this week, ordered lawyers for the Justices to submit a redacted term sheet to allow for a better assessment of the proposed financing deal.
The Justice attorneys entered a heavily redacted term sheet while also offering to let the judge privately see an unredacted version.
Lawyers for the Justices are using the proposed financing agreement to seek a 60-day continuance of deadlines and hearings in a federal lawsuit, arguing that the financing will allow them to repay their existing debts in full and effectively end claims by the parent company of rival Omni Hotels & Resorts.
Even the redacted term sheet provides significant information.
The lender is identified for the first time as Kennedy Lewis Investment Management LLC, which is a New York-based alternative asset management firm focused on opportunistic and private credit. Founded in 2017, it frequently invests in distressed debt and focuses on situations driven by events.
Overall, the firm says it manages more than $35 billion in assets.
The amount of the financing, as described in prior court filings but confirmed in the term sheet, is up to $500 million.
The primary parties include Justice Family Group LLC and a new holding company and subsidiary to be created prior to closing.
The loan is to be secured on a first-lien basis by a pledge of 100% equity in the borrower and all Greenbrier assets. Collateral also includes development projects, land and timber farms.
It also includes personal guarantees by some of the parties, although specific names are redacted in the exhibit. Jim Justice and several of his family members have signed personal guarantees in past financial arrangements.
Lawyers for the Justices conveyed the lending firm has expressed significant concern that public disclosure of its proprietary strategies and specific commercial terms would harm its competitive standing and give future counterparties an unfair advantage in negotiations.
So that is the rationale for why the term sheet submitted for public view is redacted so heavily.
A declaration by Steve Ruby, the Charleston attorney who represents the Justices, wrote in a declaration that the term sheet includes information typically kept confidential in the finance industry.
For example, he wrote, the redacted terms include the allocation of the total loan commitment among tranches, distribution and waterfall provisions, interest rates, fees, default rates and other economic and pricing terms.
“The commercial terms that a financing company such as the Financing Partner uses in the transactions in which it participates are essential to its business strategy. The confidentiality of those terms has independent economic value just as the confidentiality of a secret recipe used by a food or beverage manufacturer has independent economic value.
“If the redacted terms in the redacted Term Sheet were publicly disclosed, they would provide the Financing Partners’ future counterparties with information that would not otherwise be available to them and that would give them an unfair advantage in negotiating transactions with the Financing Partner.”
The historic resort is owned by Senator Jim Justice and his family, who purchased The Greenbrier out of bankruptcy in May 2009. Since then, it has remained a central asset of the Justice family business empire even as financial troubles have swirled.
Their lender was Carter Bank & Trust of Martinsville, Va., which went through periods of conflict with the Justices as the original debt ballooned.
This past March, newly formed White Sulphur Springs Holdings LLC bought nearly $300 million in first-lien debt on The Greenbrier and related properties from Carter Bank. The holding company does not own the hotel but does own the debt.
White Sulphur Springs Holdings is an affiliate of Texas-based TRT Holdings, which is owned by Texas billionaire Robert Rowling, whose son Blake serves as the company’s president. Their Omni hotel company operates more than 50 luxury properties, including The Homestead, which is less than an hour from The Greenbrier.
Days after the debt purchase, White Sulphur Springs Holdings asked for receivership for the hotel, contending the Justices have been diverting profits to other interests while building up deferred maintenance, putting the collateral at risk.
The holding company also asked a federal judge for a temporary injunction order that would push the Justices out of hotel control.
Lawyers for the Justice family on Friday publicly announced that they have an agreement on financing that’s enough to pay off outstanding loan debt while also providing funding to resolve other outstanding obligations like tax liens. They said the amount would also allow for hotel upgrades.
The same day, lawyers for the Justices also entered a filing to ask for deadlines and hearings in the ongoing federal court case to be delayed 60 days because the financing arrangement had emerged, although they said “specific terms of the financing are commercially sensitive and subject to a nondisclosure requirement.”
Lawyers for White Sulphur Springs Holdings wrote in their own court filing that they would need more information about the potential loan to assess their position.
“The purported financing could vanish at any moment,” wrote lawyers for White Sulphur Springs Holdings in a federal court brief filed over the weekend.
The Justice filing about the term sheet included a back and forth via email between lawyers for the parties to the case.
In those, Clay Hoblit, a Texas lawyer working for the Omni interests, wrote that “If your clients are serious about paying us in full, you will provide the term sheet/related documents to my client.
“We are prepared to enter into a confidentiality agreement to protect all parties. Whether you provide these documents to the court is up to you.”