NEW YORK, March 14, 2016 /PRNewswire/ -- Leading securities
litigation law firms Grant & Eisenhofer and Gardy
& Notis have filed a class action lawsuit against miner
Cliffs Natural Resources Inc. (NYSE: CLF), alleging that the
Cleveland-based company
violated federal law when it executed a private debt exchange which
allowed only select group of institutional bondholders to exchange
their unsecured corporate bonds for secured bonds. The suit
contends that the exchange offer, which took place late last month,
wrongfully denied retail bondholders the opportunity to
participate.
The class action was brought in New
York federal court by two individual bond buyers on behalf
of all holders of 5.90% Senior Notes due 2020 (CUSIP 18683KAA9) and
6.25% Senior Notes due 2040 (CUSIP 18683KAC5) who are not qualified
institutional buyers.
The complaint alleges that Cliffs, which has experienced
financial challenges in the face of falling commodity prices,
attempted to alleviate the pressure on servicing its debt by making
the exchange offer to a limited number of its bondholders.
Under the terms of the offer, certain senior notes would be
exchanged for newly-issued 8.00% 1.5 Lien Senior Secured Notes due
2020. The suit contends that the February 29, 2016 exchange — which allowed
participation only by bondholders who were qualified institutional
buyers (as defined under Rule 144A of the Securities Act of 1933) —
violated the rights of the remaining non-qualified institutional
buyers.
Prior to the exchange, the total principal value of the 2020 and
2040 Notes outstanding was approximately $783.6 million. After the exchange, $259.5 million in aggregate principal amount of
the notes had been tendered in the exchange offer, while
approximately $524.1 million in
principal amount of the 2020 and 2040 Notes were not tendered.
A similar class action suit was filed in New York federal court earlier this month,
also by Grant & Eisenhofer and Gardy & Notis, against oil
and natural gas company Vanguard Natural Resources and
one of its subsidiaries. In that case (detailed at
www.vnrbonds.com), plaintiff bondholders also accused Vanguard of
wrongfully cutting retail investors out of an exchange offer that
was presented only to qualified institutional buyers.
"In both the Cliffs case and in the Vanguard matter filed
recently, you have companies facing financial stress making
respective exchange offers that effectively shut out retail
investors and result in the creation of two classes of bondholders
with very unequal rights," said Jay
Eisenhofer, managing director of Grant & Eisenhofer.
"Qualified institutional buyers of corporate debt in each case had
a distinct advantage over the companies' retail investors — they
were privy to a transaction that allowed them to exchange their
unsecured notes for secure notes. That is an outright violation of
the law."
The suit against Cliffs contends that the company disclosed only
to qualified institutional buyers its views on the risk of not
exchanging the unsecured senior notes into the senior secured
notes, while failing to share its views on risk with the plaintiff
bondholders.
Mr. Eisenhofer stated, "Risk of an exchange offer wasn't
disclosed by Cliffs in their offering prospectuses for the
unsecured senior notes, nor could it have been foreseen by retail
investors and non-qualified institutional buyers at the time they
purchased their bonds."
The complaint notes that the exchange offer subordinates the
unsecured senior notes held by the plaintiff class members to the
notes held by qualified institutional buyers who elected to
exchange their holdings. The suit alleges that as a result of its
exchange offer, Cliffs impaired class members' contractual rights
in violation of the Trust Indenture Act of 1939.
"The Trust Indenture Act was intended to protect minority
holders such as the plaintiffs from conduct of issuers in instances
such as these," said Grant & Eisenhofer director
Gordon Z. Novod. "Both the
Cliffs and Vanguard filings highlight a disturbing pattern among
financially troubled commodity companies. In both cases, the M.O.
was to deal with retail investors differently and to count on them
to not be able to mount any meaningful, organized resistance to the
companies' shell game."
Mr. Novod added, "Additional analysis by our firms have
uncovered a pattern of similar conduct by other companies and we're
now exploring legal options for retail bondholders on a
case-by-case basis."
The case caption for the action is: Waxman, et al. v. Cliffs
Natural Resources Inc., Case 16-cv-1899. It was filed
March 14, 2016 in the U.S. District
Court for the Southern District of New
York.
For additional information, please visit the website
www.clfbonds.com.
About Grant & Eisenhofer
Grant & Eisenhofer is one of the top litigation and
arbitration firms in the United
States. The Firm represents institutional investors from
across the globe in U.S. and international securities class
actions, derivative lawsuits, antitrust suits, bankruptcy
litigation and other complex financial litigation matters. The Firm
has more than 60 attorneys, with offices in Wilmington, New York and Chicago, and an international docket of
high-profile cases. G&E has recovered more than $28 billion in the last 10 years and has twice
been cited by RiskMetrics for securing the highest average investor
recovery in securities class actions. G&E has been named one of
the country's top plaintiffs' law firms by The National Law
Journal for the past 12 years, and was named one of the
nation's "Most Feared Plaintiffs Firms" by Law360 every year
since the inception of the list. For more information please visit
http://www.gelaw.com/
About Gardy & Notis, LLP
Gardy & Notis, LLP is a boutique litigation firm with
offices in New York and
New Jersey that represents
individual and institutional investors in securities and derivative
lawsuits and other complex class actions. The attorneys at Gardy
& Notis, LLP have litigated hundreds of cases in both state and
federal courts throughout the United
States, primarily involving federal or state securities
laws, mergers and acquisitions and corporate governance matters,
consumer protection laws, employment collective and class actions
and product liability claims resulting in hundreds of millions of
dollars of recovery for their clients. For more
information please visit http://www.gardylaw.com/
From: Allan Ripp 212-262-7477 arippnyc@aol.com
Elise Martin 302-622-7004
emartin@gelaw.com
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SOURCE Grant & Eisenhofer