COURT: More Toys 'R' Us claimants sue Maglan Capital affiliate over unpaid put agreements

24 October 2018
Two Toys ‘R' Us suppliers have filed suit against ETG Capital Advisors in New York over unpaid put fees, accusing the Maglan Capital affiliate of breach of contract, unjust enrichment and fraud.
DGL Group Ltd. and Happy Threads LLC signed claims purchase agreements with ETG in the months after Toys filed for Chapter 11 protection in late 2017. The plaintiffs each paid “put fees” to ETG to insure their receivables should the retail giant end up in liquidation. DGL paid ETG USD 41,400 to guarantee a payout of up to USD 200,000 on its claims against Toys, while Happy Threads paid about USD 6,500 to insure claims of up to USD 80,000.
Toys shifted its free-fall Chapter 11 process to a wind-down this March, triggering one of the largest retail liquidations in US history. The conversion also triggered ETG’s put agreements with DGL and Happy Threads. Toys counsel Kirkland & Ellis later notified DGL that it was given an allowed claim of about USD 316,500, while Happy Threads was given an allowed claim of about USD 123,200. The claimants notified ETG that they were seeking their full respective payouts under the insurance agreements, but ETG failed to pay by the deadline specified under their contracts, according to the complaint.
The suit echoes one filed last week in the same court, by Kolcraft Enterprises, which seeks USD 1.25m in compensatory damages from ETG Capital and Maglan Distressed Master Fund, as well as pre- and post-judgment interest, costs and expenses.
Maglan Capital is an event-driven hedge fund focused on distressed companies, according to its website. The funds are led by Steven Azarbad and David Tawil, both former Credit Suisse investment bankers who launched their careers as bankruptcy attorneys.
The plaintiffs are represented by Teitelbaum Law Group. ETG is represented by The Esses Law Group.
The case is DGL Group Ltd. and Happy Threads LLC v ETG Capital Advisors LLC, number 655266/2018, in the Supreme Court of the State of New York.
by John Bringardner