Lenders to Chicago-based renewable energy company Hecate Holdings LLC have filed a lawsuit in Delaware’s Court of Chancery, alleging breach of an $82 million loan agreement. The suit accuses Hecate Holdings of holding collateral “hostage” and diverting collateral sale proceeds to unsecured accounts, violating contractual obligations.
Filed on behalf of investment groups affiliated with Victory Capital Management (VCM), the complaint claims Hecate Holdings planned to transfer pledged assets to unsecured funds, despite earlier agreements ensuring those assets were secured for VCM’s funds.
“Defendants committed distinct acts of dominion wrongfully exerted over plaintiffs’ property,” states the complaint led by VCM-affiliated New Energy Capital funds, adding that Hecate Holdings was fully aware of plaintiffs’ security interest in substantially all of the company’s property.
The lawsuit further alleges unauthorized sales of collateral, concealment of proceeds in accounts controlled by Hecate Holdings through its affiliate Hecate Energy Group LLC (HEG), and withholding of transaction documents related to these activities.
Lenders seek a temporary restraining order and preliminary injunction to prevent Hecate Holdings from directing assets away from the secured lenders.
According to the complaint, Hecate Holdings and its managers overborrowed based on an anticipated right to compel Repsol Renewables NA to buy its 60% interest in HEG put options and other cash options. Now, facing insufficient proceeds to cover the debt, the company allegedly continues to withhold collateral to pressure creditors into accepting a cashless settlement.
Despite the lenders’ consent rights, the complaint alleges that Hecate Holdings negotiated a settlement with Repsol without involving the lenders. Approximately $75 million in settlement funds were reportedly wired to an account controlled by Hecate Holdings, contrary to lender claims that those funds were part of their collateral.
The lawsuit states that those involved “intentionally hid the proceeds of plaintiffs’ collateral” and accused Hecate Holdings of playing a “shell game” with the secured assets.
The defaults triggered lenders’ rights to become attorney-in-fact with authority to control and take possession of the collateral, excluding Hecate Holdings from such control. However, the unauthorized settlement arranged for the funds to be wired into a bank account managed by Hecate Holdings through HEG.
Hecate Energy Group has developed over 47 solar energy projects across the U.S., with 3.6 gigawatts under contract and over 40 gigawatts in development.
The complaint also accuses Hecate Holdings’ managers of refusing to deposit settlement proceeds into accounts controlled by VCM-affiliated funds, instead allegedly hiding the funds to extort a favorable settlement on overdue loan obligations.
Legal representatives for NEC Fund VI HE Lender LLC and other creditors include A. Thompson Bayliss and Caleb R. Volz of Abrams & Bayliss LLP, and Robert A. Skinner, Sarah M. Samaha, and Peter J. Sheffer of Ropes & Gray LLP. Counsel for Hecate Holdings and HEG was not immediately available.
