Davis Polk Advises Morgan Stanley in Connection with the Anthracite Bankruptcy Case

Davis Polk advised Morgan Stanley Mortgage Servicing Limited and Morgan Stanley Principal Funding, Inc. in connection with litigation and comprehensive settlements with the Chapter 7 trustee for the bankruptcy estate of Anthracite Capital, Inc.

Prior to filing a voluntary petition under Chapter 7 on March 15, 2010, the Anthracite entities were in the business of acquiring pools of loans in the form of commercial mortgage-backed securities. The Morgan Stanley entities provided secured financing to Anthracite through a pre-petition $300 million facility.

The settlements successfully resolved complaints the Chapter 7 trustee filed against the Morgan Stanley entities and Anthracite’s other pre-petition lenders asserting various claims, including for fraudulent conveyance and avoidance of allegedly preferential pre-petition transfers and unauthorized post-petition transfers under the Bankruptcy Code. Pursuant to the settlements, the Morgan Stanley entities sold their collateral, which included various collateralized debt obligations, to a J.P. Morgan entity, Starwood Property Trust, Inc. and an Hoche Partners entity. As a result of the collateral sales, the Morgan Stanley entities were able to recover a substantial amount of their pre-petition loan.

The Davis Polk litigation team included partner Benjamin S. Kaminetzky and associate Andrew Ditchfield. Partner Brian M. Resnick provided restructuring advice. Partner Lawrence E. Wieman provided credit advice. Partner Marc O. Williams provided mergers and acquisitions advice. The tax team included partners Neil Barr and Lucy W. Farr. Members of the Davis Polk team are based in the New York office.