Document: In re BankAtlantic Bancorp, Inc. Litig., C.A. No. 7068-VCL (Del. Ch. Feb. 27, 2012)
The Delaware Court of Chancery enjoined defendant BankAtlantic Bancorp, Inc., a bank holding company (“Bancorp”), from consummating a sale of its only substantial asset, BankAtlantic, a federal savings bank (“BankAtlantic”), on the basis that the sale would violate eight substantially identical indentures governing Bancorp’s debt securities. Specifically, each indenture prohibited Bancorp from selling all or substantially all of its assets unless the purchaser assumed Bancorp’s obligations under the indenture. Bancorp had entered into an agreement for the sale of its stock (the “Sale”) in BankAtlantic to BB&T Corporation (“BB&T”), and it was undisputed that BB&T was not assuming Bancorp’s obligations under the indentures. In determining whether the Sale would constitute a sale of all or substantially all of Bancorp’s assets, the Court analyzed the effects of the Sale on both a quantitative and qualitative basis as it was required to, under New York law, which governed all but one of the indentures. On a quantitative basis, the Court looked at book value and found that BankAtlantic constituted 85-90% of Bancorp’s book value. In so finding, the Court rejected defendant’s argument that the value of the consideration that Bancorp was receiving from BB&T for BankAtlantic’s stock should be subtracted from the numerator when calculating the percentage of Bancorp’s book value represented by BankAtlantic. On a qualitative basis, the Court found that the Sale would constitute a watershed event. Following consummation of the Sale, Bancorp would exit the banking business and lose its status as a federally regulated bank holding company. Accordingly, after finding that plaintiffs would suffer irreparable harm if the Sale were not enjoined and that the balance of the equities favored an injunction, the Court enjoined the Sale.