Financial services company Bread Financial Holdings Inc. and its CEO have asked an Ohio federal judge to toss a proposed investor class action over the alleged “death spiral” of a now-bankrupt spinoff company, saying the suit actually details Bread’s “good faith efforts” to establish the spinoff as a successful independent venture.
In a dismissal bid Friday, Bread and CEO Ralph Andretta told U.S. District Judge Edmund A. Sargus Jr. and U.S. Magistrate Judge Elizabeth Preston Deavers that allegations from New York-based financial management firm Newtyn Partners LP should be dismissed with prejudice. Setbacks sustained by Bread spinoff Loyalty Ventures after it became a separate company, the defendants argued, “are not a basis for claiming fraud.”
Bread pointed out that it had retained a “significant” 19% equity stake in its spinoff, which was at one point valued at about $50 million, as support for its contention that Bread had a literal vested interest in Loyalty Ventures’ prosperity.
Based on that investment, Bread argued, the most plausible inference would be that it “believed that the spinoff would be in the best interests of [Bread] stockholders, and that Loyalty Ventures had sound prospects for success as a stand-alone company.”
