This case arose from a failed effort by Landry’s Restaurants, Inc. to preempt the exercise of rights by the holders of $400 million in Landry’s senior notes. Gibbs & Bruns was retained to represent the noteholders after an ex parte temporary restraining order had been entered enjoining them from exercising their rights under the notes and a related Indenture of Trust. Landry’s preemptive strategy collapsed during the temporary injunction hearing, however, and resulted in an overwhelming defense win that netted a multi-million dollar increase in the interest rate to be paid to the Landry’s noteholders.
The issue at the hearing concerned Landry’s failure to timely file its Form 10K. This created an event of default that entitled the noteholders to accelerate their notes and demand that they be paid, in full, immediately. Landry’s claimed it would be irreparably injured if the notes were accelerated and paid, as the noteholders and the Indenture Trustee demanded. The case proceeded to a temporary injunction hearing, at which Landry’s Chairman, Tilman Fertitta, was called as Landry’s first witness. After the noteholders’ lead counsel, Kathy Patrick, concluded her cross-examination of Mr. Fertitta, the court called a recess. Landry’s settled and released its claims within the hour, with one important condition: Landry’s asked for, and obtained, an order sealing the record of Mr. Fertitta’s testimony.
The monetary terms of the settlement were a striking reversal of fortune for Landry’s. The company agreed to pay the noteholders $3 million to reinstate the notes. It assumed responsibility for all of the noteholders’ and Indenture Trustees’ legal fees and expenses. It increased the interest rates on the notes by a full 2%, and it also gave the noteholders the right to put the notes to Landry’s within eighteen months at a price above par value.
All told, what began as an aggressive offensive move by Landry’s ended in a defensive rout in which the noteholders and the Indenture Trustee emerged victorious. Under the settlement, if the noteholders hold their notes to full maturity, their defensive recovery will be over $60 million; if they hold only until their 18-month put right, their recovery will still be over $20 million. The case, including all of Landry’s affirmative claims against the bondholders and the trustee, was dismissed with prejudice on August 29, 2007.