By Nick Brown
NEW YORK, Jan 7 (Reuters) - The former head of defunct
packaging firm Radnor Holdings Corp is suing the law firm that
led it through its 2006 bankruptcy and the hedge fund that
acquired its assets, saying they colluded to provide the fund,
Tennenbaum Capital Partners, with a $100 million windfall.
Skadden Arps Slate Meagher & Flom, along with Tennenbaum and
several legal and financial advisers, were named as defendants
in a complaint in U.S. Bankruptcy Court in Wilmington, Delaware,
on Dec. 26.
The plaintiff, former Radnor Chief Executive Michael
Kennedy, said he should be repaid more than $75 million and his
company's 2006 sale to Tennenbaum voided.
He said Skadden and Tennenbaum concealed a longstanding
business relationship and conspired to make sure Radnor wound up
in Tennenbaum's hands.
A representative for Tennenbaum did not return a call
seeking comment on Friday.
Lawrence Spiegel, Skadden's general counsel, said Kennedy is
merely looking to avoid liability stemming from the case.
According to the complaint, Tennenbaum has claimed that Kennedy
is liable under a $10 million personal guaranty on Tennenbaum's
$23.5 million loan to Radnor in 2006.
"This is a re-hashing of baseless allegations by the
disappointed former majority shareholder and CEO of Radnor, who
personally guaranteed and seeks now to avoid liability of
Radnor's pre-bankruptcy obligations," Spiegel said.
Kennedy levied 10 claims in the lawsuit, including fraud,
conspiracy, malpractice and breach of contract.
Radnor, which made food packaging and chemical products for
food chains including McDonald's Corp, declared bankruptcy in
2006 after Hurricane Katrina led to shortages in natural gas and
Radnor was eventually sold to Tennenbaum, which had made
equity investments in the company and was the holder of about
$95 million in bonds.
Prior to bankruptcy, Kennedy had tapped Skadden to advise it
on a possible asset sale and out-of-court restructuring. But
Kennedy said he was unaware at the time that Skadden had been
paid about $4 million in 2004 and 2005 for legal services
related to helping Tennenbaum rai s e funds it later invested in
Skadden partners, including at least one involved in the
Radnor case, also invested their own money in Tennenbaum funds
through a Skadden-controled investment vehicle, the complaint
Kennedy said Skadden and Tennenbaum consistently rejected
his proposals to restructure Radnor through equity investments
and sales of some assets. Skadden advised Radnor that a
bankruptcy sale to Tennenbaum was the most realistic option,
The sale to Tennenbaum, which closed in November 2006, made
the hedge fund about $100 million while wiping out Kennedy's
family stake in the company, according to the complaint.
The case is Michael T. Kennedy v. Skadden Arps Slate Meagher
& Flom, U.S. Bankruptcy Court, District of Delaware, No.
The Radnor bankruptcy is In re Radnor Holdings Corp, in the
same court, No. 06-10894.
For Michael Kennedy: Pro se.
For Skadden Arps Slate Meagher & Flom: Not immediately
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