Twin River Execs Skirt Most of Chatham Asset Stock Suit – But Board, Top Lawyer Still Face Partial Challenge

Posted on: January 14, 2020, 09:33h. 

Last updated on: January 14, 2020, 11:26h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

High-ranking executives at Twin River Worldwide Holdings, Inc. (NYSE:TRWH) are in the clear in a lawsuit brought against the company by Chatham Asset Management, LLC. But the board of directors and general counsel Craig Eaton must face part of the hedge fund’s legal challenge, according to ruling by a Delware Chancery Court judge delivered on Monday.

Chatham Asset Management, previously owner of the National Enquirer, has tabloid-worthy legal drama with Twin River. (Image: Fortune)

Chatham’s suit accuses Twin River, the operator of Rhode Island’s two casinos, of orchestrating a dilutive equity sale for the benefit of Standard General LP, a hedge fund controlled by TRWH director Soohyung Kim. As of the end of Sept. 30, Kim’s Standard General was, by far, the largest TRWH investor, controlling 12.25 million shares of the gaming company’s shares.

Chatham’s litigation against TRWH named the company as well as CEO George Papanier, CFO Stephen Capp, former Executive Vice President Glenn Carlin, Chief Marketing Officer Phil Juliano, Vice President of Finance Jay Minas, Eaton and Kim as defendants.

On January 9, 2019, Chatham filed the Second Amended Complaint asserting fourteen claims,” according to a Chancery Court document obtained by Casino.org. “On February 20, 2019, defendants moved to dismiss nine of those claims under Court of Chancery Rule 12(b)(6) for failure to state a claim of relief.”

Last September, the court heard arguments on a motion calling for partial dismissal. By that time, Chatham and Twin River agreed to dismiss four of nine claims, but the court ruled against erasing several other counts. The Monday ruling pertains to breach of fiduciary duty claims brought by the hedge fund.

Important Claims Dropped

Count IV, Chatham’s assertion that TRWH didn’t adequately inform investors regarding a 2016 stock offering designed to help Standard General increase its stake at the expense of other shareholders, was dismissed by the court.

“Defendants’ motion to dismiss Count IV is GRANTED because Chatham has failed to show that the OTP (offer to purchase) omitted any facts concerning Standard General that would have been material to a reasonable stockholder deciding whether to participate in the Tender Offer,” according to the ruling.

Count V, the hedge fund’s direct claim against director and officer defendants, was also dropped, as the court ruled the investment firm’s challenge based on $3.8 million in make-whole-payments to the director defendants, excluding Kim, wasn’t valid, nor was it material information for shareholders.

At one point, Chatham, which specializes in credit trading and was previously the owner of the National Enquirer, controlled 15 percent of Twin River. But the investment manager is no longer found among the casino operator’s top 20 investors.

One Victory For Chatham

The Chancery Court is allowing the hedge fund’s claim of breach of fiduciary duty, referred to in the filing as Count IX, to proceed against the director defendants and legal counsel Eaton. But the motion as it pertains to Carlin, the aforementioned vice president; was dismissed.

News of the Chancery Court decision comes about a month after Twin River appointed Kim to chairman of the board.