According to the Wall Street Journal, a New York state judge has ruled that investor David Lichtenstein's Lightstone Holdings LLC owes lenders $100 million because he violated a clause in his loan documents that prohibited him from seeking bankruptcy protection for the Extended Stay Inc. hotel chain.
The article says that the ruling Thursday by New York Supreme Court Judge Melvin L. Schweitzer stands to focus more attention on so-called bad-boy clauses in real-estate loans. Those clauses require the borrower to pay lenders a set penalty for putting the property pledged as collateral on a loan into bankruptcy or otherwise wasting its value.
"It will be appealed. I can't comment," Mr. Lichtenstein said Friday. His attorneys at Kasowitz, Benson, Torres & Friedman didn't immediately return a call seeking comment on Friday.
This decision calls into question several other rulings in different states that concluded that Lichtenstein and his hand picked board of directors did not violate their fiduciary duty to shareholders, including the relentlessly denuded of Prime Group Realty Trust. That this creep managed to strip PGRT of cash and assets is not in dispute, the only question is when PGRT shareholders will get a fair hearing on Lichtenstein's rapacious behaviour.