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lenders. Also, to obtain loans from the lenders, the
partnerships made financial arrangements with Admiral in which it
guaranteed the performance of the limited partners. In that
regard, the partnerships executed an agreement to indemnify
Admiral against losses on the financial guaranty bonds in the
event that the insurance company was obligated to reimburse the
lenders on all outstanding loans. In connection with the
foregoing transactions, Admiral possessed security interests in
the investor notes. The partnerships, however, were unable to
discharge the indebtedness to the lenders. Furthermore, upon
notice and demand from the lenders, the limited partners did not
meet their obligations under the outstanding investor notes.
Consequently, Admiral, as the guarantor, was obligated to pay the
lenders on the bonds. Subsequently, there was a settlement in
which both Admiral and the partnerships released the limited
partners from all obligations on the investor notes, and, in
turn, the limited partners agreed to surrender and convey their
partnership interests back to the partnerships. Moreover,
Admiral agreed to indemnify the limited partners against claims
by third parties in connection with the investor notes.
The sum and substance of the foregoing transactions reflect
that the limited partners did not unilaterally possess rights of
reimbursement from the partnerships or the general partners for
amounts owed by the limited partners to the lenders with respect
to the investor notes. At the time those notes were pledged as
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Last modified: May 25, 2011