Tuesday, November 27, 2007
URI yesterday filed a motion in Delaware Chancery Court for expedited proceedings (download the motion here). URI is requesting that they be permitted to file a summary judgment motion by November 29 with oral argument to be heard as soon as possible thereafter. Alternatively, URI requests that a trial date be set so that a decision can be rendered before January 22, 2008.
URI references the Jan 22 date since:
[T]he reason it is important that this proceeding be expedited, is that delay will frustrate plaintiffs ability to compel defendants to draw down their committed financing. The obligation of defendants' financing sources to provide necessary acquisition funding expires on January 22, 2008 2 (see paragraph 9 of Exhibit B hereto stating that these commitments "automatically terminate without further action or notice at 5:00 p.m. (Eastern Standard Time) on the day that is six months from the date hereof[July 22,2007] (the 'Expiration Date'), if the Closing Date shall not have occurred by such time."). Thus, for plaintiff to receive meaningful relief, this action must be fully and finally adjudicated before January 22, 2008.
I'm skeptical of this argument -- as I stated before "[t]he banks here (and Cerberus) have no incentive for a quick ruling in this dispute. Therefore, they will likely do what UBS has done in Genesco/Finish Line -- simply extend the drop-dead date to avoid grounds for a preliminary injunction ruling." Nonetheless, the Delaware Chancery court is likely to accommodate URI with some form of expedited proceedings based on the general harm to URI: which is why I am surprised URI did not make this argument. My speculation is that URI did not do so because they want to appear to the public as still in good shape, but will likely raise the issue orally before the court. The bottom-line is that this case is likely to move quickly but still any summary judgment motion is unlikely to be decided until next year. A trial would not be until the Spring at best, and more likely the Summer. And Cerberus has every reason to delay here in order for the credit markets (and its own financial position) to improve.
Finally, note that the summary judgment motion request is similar to the "paper ruling" SLM had requested. It increasingly appears that there exists little parol evidence with respect to the reading of this contract -- i.e., no real extrinsic evidence outside the merger agreement as to what the parties meant by this contract and whether it does indeed contemplate specific performance. Indeed, the only evidence cited by either party thus far has been the transaction documentation and the proxy statement. And the ex post facto attempts of URI to clarify the wording of the transaction documents through the proxy agreement are likely to be disregarded by the court. It thus appears that this really is a matter of simple contract interpretation -- this lends itself to a summary judgment motion but highlights the uncertainty in this case due to the clear ambiguity in the documents. I think this favors URI, but ultimately pushes both parties to a settlement.