Beach Point Capital Management, LP
O’Melveny secured a favorable settlement for Beach Point in a dispute stemming from a loan of more than US$73 million provided to real estate company Variant Holding Company, LLC to finance the acquisition of various apartment complexes around the United States. Beach Point sued in California state court after Variant defaulted on the loan. Discovery revealed that Variant had used shell entities, kick back arrangements, and forged documents to abscond with loan proceeds intended for capital expenditures on the apartment complexes. Variant also was skimming proceeds off the top of the sales of certain properties that were otherwise due to Beach Point under the loan agreement. The scheme resulted in the diversion of millions of dollars to Variant and its management at Beach Point’s expense. Variant responded by filing for bankruptcy in the District of Delaware, temporarily staying the California litigation and the foreclosure auction. O’Melveny then immediately filed a motion for the appointment of a chapter 11 trustee to take over control of Variant. The US Department of Justice joined in the request for a trustee, citing the overwhelming evidence of fraud that O’Melveny had amassed and presented. On the eve of the trustee motion hearing, Variant agreed to oust current management and appoint an independent board of managers and a chief restructuring officer to oversee the sale of its assets. Variant also agreed to pay Beach Point US$78 million plus interest from the proceeds of the sales.