Opinion ID: 2301005
Heading Depth: 3
Heading Rank: 3

Heading: Qualitative Factors

Text: BankAtlantic always has been Bancorp's principal asset and, since February 2007, has been Bancorp's only operating asset. Bancorp was created to hold BankAtlantic, and Bancorp has presented itself to investors on a consolidated basis with BankAtlantic. Although Bancorp previously held Levitt Corporation and Ryan Beck, those entities constituted only a small portion of Bancorp's total assets and were divested before the issuance of the last two series of TruPS. Bancorp has relied at all times on BankAtlantic to service the Debt Securities. As a practical result, substantially all of [Bancorp's] property, as set forth in Indentures, is synonymous with BankAtlantic. The Sale Transaction will change fundamentally the nature of Bancorp's business. According to the first page of Bancorp's most recent annual report on Form 10-K, Bancorp is a Florida-based bank holding company and own[s] BankAtlantic and its subsidiaries. JX 96 at 1. The Form 10-K describes BankAtlantic as Bancorp's principal asset[]. Id. The annual report focuses overwhelmingly on the assets and operations of BankAtlantic and minimally on Bancorp's other assets. Through the Sale Transaction, Bancorp will exit the banking business, lose its status as a federally regulated bank holding company, and divest itself of BankAtlantic and its subsidiaries. Bancorp currently owns 100% of an entity with the following characteristics:  a valuable brand that is widely recognized as Florida's Most Convenient Bank;  the best [banking] franchise in Florida (Tr. 749);  $3.3 billion in deposits that are recognized as one of the best deposit bases in the nation (Tr. 750);  $2.1 billion in performing loans;  over 1,000 employees;  78 physical branches;  a 180,000 square foot corporate headquarters. After the Sale Transaction, Bancorp will own 100% of an entity with no brand, no banking franchise, no deposit base, no branches, eight current employees, and a portfolio of criticized assets. It is difficult to imagine a transaction that would have a greater qualitative impact on Bancorp. Despite this overwhelming evidence, Bancorp contends that it will maintain a degree of continuity of assets, as ... Retained Assets LLC will continue to hold, invest in, and actively manage a commercial real estate portfolio, wholesale residential loans, and investments including tax certificates. BPTB 25. As a result, Bancorp claims, Retained Assets LLC will continue most of the lines of business that [Bancorp's] subsidiaries have historically engaged in. Id. at 39. Admittedly there are high-level similarities between the lines of business that BankAtlantic currently conducts and the lines of business in which Retained Assets LLC will engage. That is necessarily true, because the purpose of the Sale Transaction is to strip out the bad assets that BankAtlantic's business has generated and leave them with Retained Assets LLC. But a continuing conceptual resemblance is not sufficient. The guiding inquiry when evaluating a transaction qualitatively is whether the debtor would cease to operate the business to which, in practical effect, the debentureholders have looked for payment of the debentures. Commentaries at 423. Institutions can share similarities yet have fundamental differences. The Cunard Line and the Cape May-Lewes Ferry both operate ships. Le Bec Fin and Lucky's Coffee Shop both serve dinner. The Massachusetts Institute of Technology and Mt. Pleasant Elementary School both teach students. A regulated commercial bank and an unregulated investment management company may both be financial institutions, but a lender would not lump them together when evaluating their creditworthiness. In this case, after the Sale Transaction, Bancorp's will have a radically altered risk profile, a transformed asset portfolio, and no regulatory restrictions. It will cease to operate the business to which, in practical effect, the holders of Debt Securities looked for payment. Although Bancorp's attorneys did their best to argue the contrary, Levan pulled back the curtain at trial. He testified that he had spent [his] entire life working at [BankAtlantic] to make it successful, thought of BankAtlantic as a Levan family enterprise, and hoped it would remain so for generations. Tr. 731. If Bancorp's business amounted to holding a real estate portfolio, purchasing residential loans, and managing tax certificates, then selling BankAtlantic would be of no moment. Instead, Levan found it incredibly distressing. Tr. 821.