Barnett U.S. Equity Fund Sues Trustees Over J.C. Penney Collateral

The complaint, filed in the Commercial Division of the New York Supreme Court, alleges that the defendants failed to secure the necessary Officer’s Certificates and legal opinions before releasing collateral that backed First and Second Lien bonds. According to the fund, Wilmington Trust improperly relied on generalized language within the bankruptcy plan rather than adhering to the specific verification requirements outlined in the original indentures and pledge agreements.

Barnett U.S. Equity Fund asserts that UMB Bank ignored repeated requests to confirm whether it had obtained the required documentation before authorizing asset releases. While the fund does not contest the validity of the underlying restructuring or the bankruptcy court’s orders, it maintains that the trustees failed in their duty to investigate and exercise the professional care mandated by their contracts. Andrew Carrillo, the fund’s manager, stated that these contractual lapses resulted in hundreds of millions of dollars in losses for bondholders. The lawsuit seeks compensatory damages for the alleged breach of indenture, security, and intercreditor agreements.