Real estate brokerage giant Realogy Corp. today announced that it has has been forced to abandon its plan, announced in November, for a debt-exchange program that was intended to lessen the company’s risk of default on bank loans (see Inman News).

A Delaware Chancery Court Judge ruled that the plan constituted a breach of earlier contracts, according to reports.

Real estate brokerage giant Realogy Corp. today announced that it has has been forced to abandon its plan, announced in November, for a debt-exchange program that was intended to reduce the company’s long-term debt (see Inman News).

A Delaware Chancery Court Judge ruled that the plan constituted a breach of earlier contracts, according to reports.

Bloomberg reported that billionaire investor Carl Icahn’s High River LP, which owns Realogy bonds, and Bank of New York Mellon Corp., which is acting as bond trustee, succeeded in the challenge of Realogy’s planned debt exchange.

Realogy is saddled with billions in debt from a heavily leveraged buyout by an affiliate of private-equity firm Apollo completed last year — the company reported $6.5 billion in total long-term debt as of Sept. 30.

Realogy CEO and President Richard Smith told Inman News that the company is "not in default nor do we anticipate any defaults" as a result of the court decision. The company had sought the debt exchange as "a chance to reduce our long-term debt," he said.

Smith also said that if Realogy does violate its debt ratio covenant at some point,  that could be "easily cured if Apollo wants to do it," noting that Apollo has $2 billion invested in the company.

According to the Bloomberg article Thursday, the debt exchange was intended to reduce Realogy’s debt by about $600 million.

The article quotes an attorney for Icahn, "This is only phase one of the case," with other aspects of the complaint still outstanding.

Realogy noted in a Nov. 25 announcement that the complaint charged that Realogy board of directors and managers breached their fiduciary duty and that aspects of the invitations to participate in the debt exchange are of a "fraudulent nature."

And company officials acknowledged in a Thursday announcement that the court granted a motion for partial summary judgment related to the claim against the debt-exchange plan, and the company "anticipates it will continue to explore other opportunities to reduce its outstanding indebtedness and improve its capital structure."

Smith said, "This is new ground for everybody," and he expects other companies will also seek debt-exchange agreements similar to the one that Realogy had sought. "It’s a tough environment, and it might get tougher."

Realogy also maintained in the statement, "The termination of the transaction will have no impact on the operations of the company."

Company officials had cited "credit and stock market turmoil" and the sagging economy as impetus for the planned debt exchange (see Inman News).

Editor’s note: The secondary headline on this article has been changed and the article has been updated with comments by Realogy CEO and president Richard Smith, who said the company is "not in default nor do we anticipate any defaults" related to debt-ratio covenant.

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