American Challenger is suing Credit Suisse and the bank’s Cayman Islands branch over the alleged failure to conclude the agreed sale of a commercial loan portfolio, which the US digital bank is blaming for the termination of its merger with Patriot Bank, announced last week.
In a court filing with the New York Supreme Court, American Challenger said the $650 million deal was a key part of its business plan and would have provided immediate revenue streams.
The company said, “Credit Suisse’s decision to flagrantly renege on its written and binding agreement to sell these critical assets to American Challenger, resulting in the failure of a merger that American Challenger was poised to complete.”
American Challenger seeks to recover “hundreds of millions of dollars in damages”.
The company, formed in 2020, describes itself as a turn-key digital bank technology and operations platform ready to launch a national retail deposit, lending and commercial operation.
Under the proposed merger with Connecticut-based Patriot National Bancorp, Patriot would have completed a capital raise of at least $875 million to enable the pro forma company to implement American Challenger’s business plan.
The merger announced in November 2021 already had conditional regulatory approval but was called off last week “in light of the parties’ expected inability to satisfy certain of the closing conditions to the merger and recapitalisation”.
The companies “remain in active discussions regarding a modified transaction,” but “it is uncertain whether a new agreement can be reached,” Patriot said in a press release last week.
American Challenger has hired Citi to explore a sale of the company.
In its court filing, the company said the commercial loan purchase agreement was concluded in January 2022, after months of negotiation.
American Challenger claims that under the agreement, Credit Suisse committed to sell the $650 million loan portfolio and American Challenger would have hired employees of Sector Financial, Inc., a Credit Suisse subsidiary, to continue administering the loans after their sale.
The company said Credit Suisse had reneged on the deal after purportedly not receiving internal approval for the sale as condition precedent.
American Challenger claims that was “a pretext” and that Credit Suisse had breached the sales agreement.
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