BFAM ASIAN OPPORTUNITIES MASTER FUND LP v. GLORY HEALTH INDUSTRY LIMITED (2026)

Order, Supreme Court, New York (Joel M. Cohen, J.), entered on or about April 16, 2025, which granted plaintiffs' motion for summary judgment, unanimously affirmed, without costs.

In February 2022, defendant Glory Health Industry Limited, a real estate developer in China, issued approximately $335 million in notes under the terms of an indenture.  The indenture was accompanied by the Global Note, which represents the entire issuance of the notes.  On issuance, the Global Note was registered in the name of the “Common Depositary” or its nominee for the accounts of nonparty Euroclear Bank SA/NV and one other entity not pertinent to this appeal.  Euroclear is a clearing system that serves as an intermediary between bond issuers and the clearing system's participants, usually prime brokers, who in turn are custodians for the bond's ultimate beneficial owners.  Plaintiffs are the beneficial owners of 26.54% of the notes, and hold their interests through their prime brokers.  Thus, plaintiffs are not the holders of the notes, and this status limits their ability to take action with respect to rights under the indenture.  Specifically, under § 2.06 of the indenture, plaintiffs were required to “rely on the procedures” of their prime brokers to transfer their interests in the notes or to exercise any rights of holders under the indenture.  Further, actions to compel payment or enforce other rights upon an event of default belong in each instance to the holder, and can be initiated only by holders of 25% or more in the aggregate of the total value of the notes.

Shortly after acquiring their notes, plaintiffs sent a demand for acceleration of the debt, and eventually commenced this action.  Plaintiffs then moved for summary judgment on their breach of contract claims.  The parties did not dispute that defendants defaulted on the notes, and as a result, the only two issues raised by the motion were plaintiffs' standing and the impossibility defense raised by defendants.

Plaintiffs established prima facie that they had standing to commence this action by submitting Euroclear's policies and operating procedures, as well as statements of account (STAC letters) from Euroclear to the prime brokers authorizing plaintiffs to bring suit.  This evidence was sufficient to establish that plaintiffs had met any requirements imposed by § 2.06 of the indenture.  Defendants argue that the STAC letters are not in and of themselves effective to authorize suit because they flatten the structure for exercising rights under the indenture, allowing plaintiffs to circumvent the proper procedure and receive authorization directly from Euroclear.  We reject this argument.  All relevant parties in the chain of custody of the notes under the indenture were subject to Euroclear's procedures, and the evidence in the record shows that plaintiffs worked through their prime broker participants to obtain the STAC letters from Euroclear.  Indeed, defendants stipulated that all of the parties in the ownership structure are governed by the Euroclear policies and procedures.  By including Euroclear's policies and procedures, as well as the authorizations in the form of the STAC letters, plaintiffs showed that all parties, including indirect participant beneficial owners of the notes, were authorized to bring this action (see Cortlandt St. Recovery Corp. v TPG Capital Mgt., L.P., 76 Misc.3d 1224[A], 2022 N.Y. Slip Op 51044[U], *9 [Sup Ct, N.Y. County 2022], mod on other grounds 249 AD3d 406 [2026] ).

In opposing plaintiffs' motion, defendants asserted that Glory Housing's performance was excused because of an intervening Chinese law making it impossible for the company to make payments due under the indenture and notes.  Supreme Court properly rejected this defense.  As stated in its terms, the indenture was expressly governed by New York law, and it did not contain a force majeure clause addressing the risk that Chinese laws would change so as to conflict with New York law.  Thus, defendants failed to raise an issue of fact as to whether they bore the risk of conflicts between New York and Chinese law (see Deutsche Bank Sec., Inc. v. Montana Bd. of Invs., 7 NY3d 65, 73 [2006], cert denied 549 U.S. 1095 [2006];  Kel Kim Corp. v. Central Mkts., 70 N.Y.2d 900, 902 [1987] ).

Finally, defendants provided no legally cognizable basis for considering the relevance of the price plaintiffs paid for the notes.  As a result, Supreme Court properly granted summary judgment without ordering further discovery on the issue.