Opinion ID: 1034091
Heading Depth: 2
Heading Rank: 2

Heading: The Ableco Transaction

Text: Newsome claims things got worse for Mahalo USA in July 2008, when Mahalo Canada caused Mahalo USA to pay off Mahalo Canada’s line of credit and enter into a new $105 million line of credit with a company called Ableco. Ableco supposedly has a “loan to own” reputation (i.e., loaning to failing companies with hopes of seizing assets upon default). Newsome says that Mahalo USA’s directors and officers knew the company could never service the new $105 million debt, but entered into the Ableco transaction anyway because it maximized their equity in Mahalo Canada. Mahalo USA defaulted on the Ableco loan about three weeks after closing. Apparently Mahalo USA soon received an offer from a third party to purchase Mahalo USA’s assets for an amount that would pay off its debts. But Mahalo Canada’s directors scuttled the deal because the offered purchase price -4- was barely more than Mahalo USA’s outstanding debt, meaning the equity holders (i.e., defendants) would see little or no profit. After rejecting the purchase offer, Mahalo Canada caused Mahalo USA to sign an amendment with Ableco that increased the credit line and the fees charged. Mahalo USA still could not pay off its debts and filed for bankruptcy protection in the Eastern District of Oklahoma in May 2009.